XAU/USD is under pressure ahead of Powell

• The US dollar is showing signs of life after recent YTD lows.
• Markets’ focus remains on Powell’s Jackson Hole speech.
• XAU/USD is facing initial resistance at its all-time high above $2,530.

XAU/USD is facing renewed selling pressure and is adding to Wednesday’s losses, returning to the region below $2,500 per troy ounce.

The corrective decline in the precious metal was accompanied by a fairly sharp rebound in the greenback, all after the US Dollar Index (DXY) broke below the key 101.00 support for the first time since December 2023 during the previous day.

Adding to the downward pressure on the yellow metal, US yields bounced back across the spectrum as market participants digested the dovish tone in Wednesday’s FOMC minutes and began warming up for the Federal Reserve (Fed) chairman’s upcoming speech. Jerome Powell at the Jackson Hole symposium on Friday.

Although the FOMC minutes suggested that an interest rate cut could be imminent as early as next month, Powell’s upcoming speech could provide further insight into his outlook on that possibility and, more importantly, reveal the potential scale of the cut. The CME Group’s FedWatch tool currently indicates a near 75% chance of a 25bps rate cut at the September 18 meeting.

If there are signs of a bigger cut, say 50 bps, it is expected to put significant pressure on the greenback and allow gold to test recent highs. Regardless, the US dollar is likely to remain under close watch for now, which may limit any downside in bullion prices.

XAU/USD Short Term Technical Outlook

The daily chart shows that XAU/USD is sailing above all of its moving averages, with a climbing 55 simple moving average (SMA) moving north around $2,390 as well as longer ones. Meanwhile, technical indicators (RSI and Momentum) have retreated from recent highs, while the daily ADX indicates a stable trend for now.

In the short term, and according to the 4-hour chart, the corrective decline persists. XAU/USD now faces the next support at the 100-SMA at $2,452 before $2,432, which looks supported by the most relevant 200-SMA at $2,428. A sustained breakdown of this region could open the door to a deeper pullback to $2,379 ahead of $2,364.

Support levels: 2,470.85 2,432.22 2,428.35

Resistance levels: 2,519.18 2,531.76 2,535.00