XAU/USD could test $2,475 as $2,500 gives way

• The price of gold extends losses to a six-day low below $2,500 on Monday morning.
• The US dollar is trying to build recovery amid light trading and a cautious mood.
• The daily RSI remains bullish, but a test of the 21-day SMA at $2,475 looks likely before gold buyers enter.

The price of gold is holding on to six-day lows below $2,500 early Monday, extending the previous week’s downtrend after Thursday’s steady rejection near $2,530.

Gold price looks to top US data for fresh rally

Gold sellers remain in control as the U.S. dollar (USD) sustained a rally against its rivals after Friday’s core personal consumption expenditure (PCE) price index threw cold water on market expectations of a further interest rate cut by the US Federal Reserve (Fed) this month. Data on Friday showed that the core U.S. PCE price index, the Fed’s preferred measure of inflation, rose 2.6 percent from a year ago and 0.2 percent in August, roughly in line with expectations.

Following a potentially less aggressive easing cycle to be launched by the Fed, the recovery in the US dollar gained traction alongside US Treasury yields, crushing non-interest-bearing gold by 1% on Friday.

Markets currently have a 67% chance of a 25 basis point (bps) cut by the Fed at its September 17-18 policy meeting and a 33% chance of a 50 basis point cut, according to CME Group’s FedWatch tool, maintaining negative pressure. intact around the gold price as the USD extends earlier losses.

Moreover, it is a Labor Day holiday in the US, and so the thin liquidity could exaggerate the downward momentum in the price of gold, too, as traders reposition themselves ahead of high-impact US economic data releases, which coming this week including ISM Manufacturing PMI, ADP Employment. Change and non-agricultural pay statutes.

Gold Price Technical Analysis: Daily Chart

Even if the technical indicators continue to favor the uptrend, the extension of the corrective decline in the price of gold could be underway.

The 14-day Relative Strength Index (RSI) is looking sharply lower, heading to challenge the 50 level, justifying continued weakness in the gold price.

Goild sellers are targeting the immediate support of the 21-day simple moving average (SMA) at $2,475, below which the symmetrical triangle resistance, turned support at $2,463, will be challenged.

Defending the latter is critical to support the August uptrend for gold buyers. Failure to hold above this level could initiate a new downtrend towards the $2,420 area, where the triangular support line and 50-day SMA converge.

On the other hand, if gold buyers settle above the 21-day SMA at $2,475 on Monday, a retracement to the $2,500 level could be seen.

Acceptance above the latter could put the previous high near $2,530 to be tested again.