The price of gold is attracting some sellers below $2,500 on a firmer US dollar

• Gold price loses traction in Monday’s Asian session.
• A stronger USD undermines the yellow metal, while a dovish Fed could limit its downside.
• Traders will focus on US PMI data ahead of Friday’s employment report.

The price of gold (XAU/USD) is extending its decline below the psychological $2,500 level on Monday. The firmer greenback after July’s US Personal Consumption Expenditure (PCE) Index weighed on the precious metal. In addition, concerns about the sluggish economy in China, the world’s largest buyer of gold, are contributing to the precious metal’s downside.

However, the growing expectation of an interest rate cut by the US Federal Reserve (Fed) at its September meeting could help limit gold’s losses as lower interest rates reduce the opportunity cost of holding gold without yield. Looking ahead, the US ISM manufacturing PMI for August will be released on Tuesday, while the services PMI will be released on Thursday. Attention will turn to US employment data on Friday, including non-farm payrolls (NFP), the unemployment rate and average hourly earnings for August.

Daily Digest Market Movers: Gold price retreats after US PCE inflation report

• Protests erupted in Israel after the country’s military recovered the bodies of six hostages it said Hamas had killed in Gaza. Israel’s largest labor group has called for a strike, saying “the entire Israeli economy will shut down” on Monday, according to CNN.
• The National Bank of China PMI (PMI) fell to 49.1 in August from 49.54 in July, missing the market consensus of 49.5. The non-manufacturing PMI rose to 50.3 in August from 50.2 previously, better than estimates of 50.0.
• Data released Friday by the U.S. Bureau of Economic Analysis showed that the U.S. Personal Consumption Expenditure (PCE) Price Index rose 2.5 percent from a year ago in July, compared with a weaker reading of 2.5 percent previously. than market expectations of 2.6%.
• Core PCE, which strips out volatile food and energy prices, rose 2.6 percent year-on-year in July from 2.6 percent previously, below the consensus of 2.7 percent.
• Markets are now pricing in a nearly 70% rate cut of 25 basis points (bps) by the Fed in September, while the odds of a 50bps cut are 30%, according to CME’s FedWatch tool.

Technical Analysis: Gold price maintains broader constructive picture

The price of gold is trading in negative territory on the day. The precious metal is maintaining the broader bullish context on the daily time frame as the price is holding above the key 100-day exponential moving average (EMA). The 14-day Relative Strength Index (RSI) is positioned above the median line around 56.30, suggesting that the path of least resistance is up.

The upper limit of a five-month-old ascending channel and the all-time high of $2,530-$2,540 appear to be a tough nut to crack for gold bulls. A bullish breakout above this level could pave the way to the psychological $2,600 threshold.

On the downside, the first downside target for the yellow metal appears at $2,470, the August 22 low. Bearish momentum could trigger an extended decline towards $2,432, the August 15 low. The next level of contention to watch is $2,372, the 100-day EMA.