Gold trades with modest gains below $2,500 as traders await Powell’s speech

• The price of gold is rising and moving away from the weekly low reached on Thursday.
• Dovish Fed expectations prompt fresh USD selling and continue to act as a tailwind.
• Geopolitical risks continue to act as a tailwind ahead of Fed Chair Jerome Powell’s speech.

The price of gold (XAU/USD) fell more than 1% on Thursday as bulls opted to take some profits off the table amid a good rebound in US Treasury yields and the US dollar (USD). However, the downside remains cushioned by growing acceptance that the Federal Reserve (Fed) will begin cutting borrowing costs in September. Bets were reaffirmed by rather unimpressive US macro data, which indicated a cooling labor market and suggested the economy was at risk of a slowdown. This tempers investor appetite for riskier assets and provides support for the safe-haven precious metal.

Apart from that, worries about a wider conflict in the Middle East helped the price of gold to attract some buyers during the Asian session on Friday. XAU/USD, however, remains below the psychological $2,500 level as traders now seem reluctant and prefer to wait on the sidelines ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium later on Friday. Powell’s comments will be closely watched for new clues about the Fed’s rate cut path. Apart from this, geopolitical developments will play a key role in influencing XAU/USD and determining its short-term trajectory.

Daily Digest Market Movers: Gold Price Draws Fresh Buyers Amid Favorable Fed Expectations, Renewed USD Selling

• The US dollar rebounded nicely from the previous day’s 2024 low on the back of a rebound in US Treasury yields and took flows away from gold prices on Thursday.
• The USD’s attempted recovery is unsuccessful following bets on an imminent start to the Federal Reserve’s rate-cutting cycle in September, which helps limit losses for XAU/USD.
• On the economic data front, the US Department of Labor (DoL) reported that initial jobless claims rose to a seasonally adjusted 232,000 in the week ended August 17, up from 228,000 previously.
• This follows the annual benchmark analysis of employment data released on Wednesday, which showed that US employers added 818,000 fewer jobs than reported in the year to March.
• In addition, the minutes of the July 30-31 FOMC meeting showed that a growing number of policymakers supported the case for a rate cut next month amid progress in reducing inflation.
• The S&P Global Flash PMI indicated that business activity in the US manufacturing sector fell at the fastest pace this year, while the gauge for the services sector unexpectedly ticked higher.
• The composite PMI showed U.S. private sector business activity continued to expand at a healthy pace and sales price inflation declined to near the pre-pandemic average.
• Kansas City Fed President Jeffrey Schmid said there is still work to be done to get inflation back to 2 percent sustainably and that he needs to see more data before endorsing a decision to cut rates.
• Philadelphia Fed President Patrick Harker said the labor market revisions were not a surprise and he was on board with a September interest rate cut as long as the data performed as expected.
• Separately, Boston Fed President Susan Collins said it would soon be appropriate to start cutting rates as inflation data is consistent with more confident inflation returning to 2 percent.
• Market attention now turns to Fed Chairman Jerome Powell’s speech, which will be scrutinized for clues about the interest rate path and provide fresh directional impetus to the yellow metal.

Technical analysis: Gold price could accelerate corrective slide once pivotal support at $2,470 is decisively broken

From a technical perspective, the overnight drop stalled near the $2,370 horizontal resistance, now turned into support, which should now act as a key pivotal point. A convincing break below could trigger some technical selling and drag the price of gold towards the next relevant support near the $2,345-$2,343 region. The corrective decline could extend further towards the 50-day simple moving average (SMA), currently pegged just above the $2,400 round figure.

On the other hand, the push back above the $2,500 mark now seems to be facing some resistance near the $2,513-2,514 area. This is followed by the record high around the $2,531-$2,532 region, which, if cleared, will be seen as a new trigger for bullish traders and set the stage for an extension of gold’s recently well-established uptrend.