XAU/USD looks to accept above $2,500 as US jobs data looms

• Gold prices take a break after a three-day downtrend, pending US jobs data.
• The US dollar remains weak on Treasury yields despite risk aversion caused by US and China woes.
• The price of gold has returned to the key 21-day SMA, a rebound against the bullish daily RSI.

Gold prices dipped below $2,500 in Asian trade on Wednesday, as sellers caught their breath after three straight days of declines and ahead of much-anticipated US jobs data for July.

Gold prices await US jobs data for fresh clues on Fed policy

The price of gold is consolidating earlier sharp recovery from eight-day lows of $2,473 as Asian traders react to weak US Institute for Supply Management (ISM) manufacturing PMI data, which raised concerns about a potential ” hard landing for the US economy.

The ISM said on Tuesday that the US manufacturing index improved slightly to 47.2 in August from 46.8 in July, but remained in contraction while coming in below the estimate of 47.5. Weak US data has accelerated bets for a 50 basis point (bps) interest rate cut by the US Federal Reserve (Fed) this month.

Markets raised the odds of a 50 bps Fed rate cut on Sept. 18 to 38 percent, from 31 percent a day earlier, according to CME Group’s FedWatch tool. Currently, the probability of such a move is 41%.

Increased bets on aggressive policy easing by the Fed is likely to keep demand for non-interest-bearing gold prices afloat, allowing buyers to regain control.

In addition, gold prices could also draw support from hopes of new policy support measures due on the books in China, following a string of disappointing business PMI data. On Wednesday, China’s Caixin Services PMI fell to 51.6 in August from a forecast of 52.1 and 52.2 in July.

Looking ahead, if risk aversion intensifies and supports safe-haven demand for the Japanese yen (JPY), gold prices and US government bonds, the US dollar (USD) could come under renewed selling pressure, thanks to the anticipated JPY sell-off . off in USD/JPY.

However, US job opening survey data could provide new clues in determining the size of the Fed’s September interest rate cut, which would have a significant impact on US dollar trading and the USD gold price.

Gold Price Technical Analysis: Daily Chart

The short-term technical outlook for the gold price remains constructive as long as buyers hold above the 21-day simple moving average (SMA) at $2,485.

The 14-day Relative Strength Index (RSI) has bounced back slightly above the 50 level, suggesting an upside is likely ahead.

On the other hand, recapturing the $2,500 level on a daily closing basis is essential for the gold price to resume its upward trajectory. The next relevant barrier on the upside is seen at the record level of $2,532, above which the psychological level of $2,550 will be tested.

If the corrective downside regains momentum, the Goild price could challenge the 21-day SMA at $2,485 again, below which the symmetrical triangle resistance turned support at $2,462 will come into play.

A new downtrend would initiate below this support level, with sellers aiming for the $2,425 area, where the triangular support line and 50-day SMA are approaching.