Gold prices fall on firm US dollar

• Gold prices edged lower during a quiet session in North America, with US markets closed for Labor Day.
• Upcoming US economic reports — ISM PMI, JOLTS job openings, ADP Employment Change and Nonfarm Payrolls — will influence the Fed’s rate decision.
• Jackson Hole Fed Chairman Powell noted that inflation is easing but risks to employment are rising, raising recession concerns.
• Geopolitical tensions remain as President Biden may propose a cease-fire agreement between Israel and Hamas, which could affect markets.

Gold prices fell during the North American session amid thin volumes due to the closure of US markets over the Labor Day holiday. Conversely, the greenback remains firm as traders brace for a jobs report that could influence the Federal Reserve’s decision on the size of its rate cut in September. XAU/USD is trading at $2,499, down 0.14%.

The US economic file will be busy this week with the release of the Institute for Supply Management (ISM) manufacturing and services PMI, JOLTS job openings, ADP National Employment Change and non-farm payrolls numbers ( NFP).

During his speech in Jackson Hole, Federal Reserve Chairman Jerome Powell commented that inflation risks are tilted to the downside while employment risks are tilted to the upside.

Last Friday, the Fed’s preferred inflation gauge, the core price index for personal consumption expenditures (PCE), was unchanged at about 2.5 percent, suggesting inflation remains under control. On the other hand, in the past four NFP reports, the Unemployment Rate has risen from around 3.8% to 4.3%, raising fears among Fed officials that the labor market may be cooling faster than expected.

This reignited recession fears, which had faded after last week’s strong US data. Initial jobless claims fell from levels at the end of July, retail sales rose sharply and the economy grew at a 3 percent pace, according to second-quarter estimates of gross domestic product (GDP) second.

After the data, bullion prices fell as investors bought the US dollar on receding recession fears.

Despite this, geopolitical risks loom even as US President Biden considers presenting Israel and Hamas with a final proposal for the release of hostages and a cease-fire agreement in Gaza later this week, according to Axios sources.

Daily Market Reasons: Gold traders await busy US economic calendar

• ISM Manufacturing PMI for August is expected to improve from 46.8 to 47.8. Services PMI is expected to expand from 51.4 to 51.5
• July JOLTS job openings are expected at 8.10 million, down from 8.184 million in June.
• Private employment, revealed by the ADP National Employment Change report, is expected to increase from 122,000 in July to 150,000 in August.
• August NFP numbers are expected to rise from 114K to 163K, while the unemployment rate could fall to a consensus estimate of 4.3% to 4.2%.
• The December 2024 Chicago Board of Trade (CBOT) fed funds rate futures contract indicates that investors are eyeing 97 basis points for Fed easing this year.

Technical Outlook: The price of gold is set to fall further below $2,500

Gold prices are biased to the upside, although momentum has turned negative as shown by the Relative Strength Index (RSI). Although the RSI is bullish, its slope is aiming downward, approaching the neutral level. Therefore, in the short term, XAU/USD is trending downward.

If XAU/USD breaks below $2,500, the next support would be the August 22 low at $2,470. Once broken, the next stop would be the confluence of the August 15 low and the 50-day simple moving average (SMA) near the $2,424-$2,431 area.

Conversely, if XAU/USD stays above $2,500, the next resistance would be the ATH, and the next resistance would be the $2,550 mark. A violation of the latter will expose you to $2,600.