XAU/USD buyers remain hopeful as $2,480 ahead of US ISM

• The price of gold remains in the red for a third straight day on Tuesday, below $2,500.
• The US dollar is clinging to recovery amid a tough China-led mood and positive Treasury yields.
• Eyes turn to the US ISM PMI as gold buyers look to defend the 21-day SMA at $2,480 amid upbeat daily RSI.

The price of gold is trading under pressure just below the $2,500 mark early Tuesday, consolidating a three-day downtrend after hitting new weekly lows. The gold price is now eagerly awaiting the US ISM manufacturing PMI data for the next directional move.

Gold price tracks US ISM manufacturing PMI ahead of key jobs data

The price of gold bore the brunt of weakened hopes of a 50 basis point (bps) interest rate cut by the US Federal Reserve (Fed) this month, following the release of July’s core price index for personal consumption expenditures (PCE). on Friday. The Fed’s preferred measure of inflation rose 2.6% on the year and 0.2% in August, roughly in line with expectations.

Markets continue to reduce bets on a big rate cut by the US central bank at its September 17-18 policy meeting, pricing in a 31% chance of such a move and a 69% chance of a cut of 25 bps, according to CME Group’s FedWatch. instrument.

Expectations of a less aggressive Fed easing cycle have allowed the US dollar (USD) to recover as it is now nearing weekly highs against its main rivals. The resurgence of the US dollar continues to turn negative for USD-denominated gold prices as US Treasury bond yields also hold on to gains from the previous week.

However, it remains to be seen whether gold’s decline holds as traders look forward to Friday’s US payrolls data to gauge the size of the Fed’s expected rate cut this month.

Ahead of that, gold traders could take cues from US ISM manufacturing PMI data due later on Tuesday and Wednesday, job offers and ADP labor change data. The headline ISM Manufacturing PMI will improve to 47.5 in August after contracting to 46.8 in July. The Price Paid component is expected to decline to 52.5 in August from 52.9 in July.

A downside surprise in the headline ISM figure or a bigger-than-expected slowdown in the price paid index could revive hopes of a 50bps Fed rate cut later in the month, weighing on the US dollar’s recovery momentum and vice versa. Markets, however, will be cautious as US traders return from an extended weekend break and also ahead of critical employment data.

Gold Price Technical Analysis: Daily Chart

From a short-term technical perspective. Gold buyers remain bullish as long as it holds above the 21-day simple moving average (SMA) at $2,480.

The 14-day Relative Strength Index (RSI) is pointing lower towards the 50 level, justifying continued weakness in the gold price. However, the leading indicator is still in bullish territory, implying a buy-the-dip opportunity.

If the decline extends, the Goild price could challenge the 21-day SMA at $2,480, below which the symmetrical triangle resistance, turned into support at $2,464, will come into play.

Defending the latter is critical to support the August uptrend for gold buyers. A new downtrend would initiate below this support level, with sellers targeting the $2,420 area, where the triangular support line and 50-day SMA are approaching.

However, should gold buyers defend the 21-day SMA at $2,480 and recapture the $2,500 level on a daily closing basis, the uptrend could resume towards the record high of $2,532.