XAU/USD has recaptured $2,510, looks to retest record highs

XAU/USD Current Price: $2,515.75

• The US consumer price index was roughly in line with expectations in August.
• Financial markets turned risk-averse as the Fed was expected to cut interest rates by 25 bps.
• XAU/USD met buyers around $2,500, aims to retest record highs in the $2,530 price area.

The gold price peaked at $2,528.95, flirting with its session high in mid-Europe. However, XAU/USD reversed course and fell to the $2,500 level following the release of United States (US) macroeconomic data. August’s consumer price index (CPI) rose 2.5% from a year ago in August, down from 2.9% in July and below the 2.6% level expected by market participants. The annual core reading met expectations in print at 3.2%, although the monthly core reading rose 0.3%, slightly higher than the previous and expected 0.2%.

The news has heavily influenced rate cut expectations, and the US Federal Reserve (Fed) is now expected to do so gradually. Market players expect the central bank to cut its key policy rate by 25 basis points (bps) when it meets next week. As the dust settled, concerns receded. US indices continue to trade in the red, but have pared their post-launch losses by half, helping XAU/USD recapture the $2,510 mark.

The next high-profile event will take place on Thursday, when the European Central Bank (ECB) will announce its monetary policy decision. Officials are expected to cut the three main interest rates by 25 bps each. Either way, a change in President Christine Lagarde’s usual wording may trigger action in financial markets.

XAU/USD Short Term Technical Outlook

Technically, the daily chart for the XAU/USD pair shows that it remains on the bullish side, despite the absence of upward momentum. The pair continues to trade above an upbeat simple moving average of 20, finding buyers around it. At the same time, the 100 and 200 SMAs maintain their bullish slopes well below the current level. Finally, technical indicators remain in positive levels, lacking obvious directional strength, but keeping risk tilted to the upside.

In the short term, and according to the 4-hour chart, XAU/USD offers a neutral to bullish position. The pair is developing above the converging 20 and 100 SMAs at around $2,507.00, while technical indicators have rebounded from around the median lines, maintaining their upward slope in positive levels.

Support levels: 2,507.60 2,489.60 2,475.70

Resistance levels: 2,519.75 2,531.60 2,545.00