Buyers could keep control while $2,500 holds as support

• Gold retreated after setting a new high, but recovered $2,500.
• The technical outlook suggests that the uptrend in XAU/USD remains short-term.
• Investors will pay close attention to US inflation data next week.

Gold (XAU/USD) corrected lower after hitting a new all-time high this week, but managed to climb above the key $2,500 level on Friday. Next week’s economic calendar will feature key US inflation data.

Gold sets another record

After ending the previous week on a bullish note, Gold went into a consolidation phase on Monday and closed the day basically unchanged. Dovish comments from Federal Reserve (Fed) officials sent US Treasury bond yields lower on Tuesday, paving the way for XAU/USD to set a fresh record high of $2,531.

“If incoming data show that inflation is moving sustainably toward target, it will become appropriate to gradually cut rates to prevent them from becoming overly restrictive,” Fed Governor Michelle Bowman said. Meanwhile, Minneapolis Fed President Neel Kashkari told The Wall Street Journal that it would be appropriate to discuss a possible rate cut in September.

On Wednesday, the US Bureau of Labor Statistics announced that the preliminary estimate of the benchmark revision points to an adjustment to total non-farm payrolls in March 2024 of -818,000 (-0.5%). Later in the day, minutes of the Fed’s July 30-31 policy meeting showed that a “large majority” of policymakers believed that if incoming data continued to meet expectations, it would likely be appropriate to ease the politics at the next meeting. Although gold struggled to maintain its bullish momentum mid-week, it managed to stabilize above $2,500 as the US dollar (USD) failed to shake off selling pressure.

After data from S&P Global showed that business activity continued to expand at a healthy pace in early August, with the flash composite PMI estimate reaching 54.1, the US 10-year bond yield gained a recovery momentum and helped the USD find a foothold. In turn, XAU/USD headed south and fell below $2,500 during US trading hours.

Improving risk sentiment made it difficult for the USD to build on Thursday’s gains and allowed XAU/USD to bounce back above $2,500 during European trading hours on Friday. Ahead of the weekend, Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium put additional weight on the USD and paved the way for a leg higher in the pair. Powell acknowledged that the time had come for monetary policy to adjust and said they would do “everything we can” to support a strong labor market while making further progress toward price stability.

Gold investors await PCE inflation data

The US economic calendar will feature data on durable goods orders for July on Monday. Although this data is generally ignored by market participants, it could trigger a market reaction if it deviates from market expectations in a significant way. A positive surprise could ease fears of a US economic recession and help the USD find demand.

On Thursday, the US Bureau of Economic Analysis (BEA) will release its second estimate of annualized gross domestic product (GDP) growth for the second quarter. Markets expect no change from the initial estimate of 2.8%. An unexpected downward revision could weigh on the USD and open the door for a leg higher in gold with the immediate reaction.

The BEA will release data on July’s personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, on Friday. Investors are likely to react to the core monthly PCE price index, which excludes prices of volatile items and is not distorted by base effects. The core PCE price index is forecast to rise 0.2% on a monthly basis. As Powell’s latest comments suggested that policymakers are now more focused on the labor market than inflation, it may take 0.4% or more for the USD to move decisively higher. On the other hand, a print at or below market expectations could support gold heading into the weekend.

Gold technical outlook

The Relative Strength Index (RSI) indicator on the daily chart remains above 60, suggesting that the bullish trend remains intact.

The $2,500 round figure (psychological level, the midpoint of the ascending retracement channel coming from mid-February) lines up as a pivotal level for Gold. If Gold continues to use this level as support, $2,600 (psychological level) could be seen as the next resistance before the upper limit of the ascending channel at $2,620.

Technical sellers may show interest if gold does not stabilize above $2,500. In this scenario, the 20-day simple moving average (SMA) could be seen as the next support at $2,455 before $2,400 (psychological level, static level, 50-day SMA) and $2,370 (lower limit of the ascending channel , 100-day SMA). ).