Gold price consolidates below $2,500, bullish potential appears intact

• The price of gold is blocking the post-NFP slide from the vicinity of the all-time high.
• Low bets on a bigger rate cut by the Fed support the USD and act as a headwind.
• Concerns about the US economic slowdown and geopolitical risks continue to provide support.

The price of gold (XAU/USD) saw an intraday reversal from the vicinity of an all-time high and fell back below the psychological $2,500 threshold after the release of key monthly US employment details on Friday. The mixed US jobs report reduced the likelihood of a further 50 basis point rate cut by the Federal Reserve (Fed), which in turn prompted short covering of the US dollar (USD) and exerted some pressure on the precious metal.

That said, worries about a US economic recession are tempering investors’ appetite for riskier assets and acting as a tailwind for gold prices. Apart from this, the lack of progress in the ceasefire negotiations between Israel and Hamas proved to be another factor supporting XAU/USD during the Asian session on Monday. This calls for caution for bear traders amid the prospect of an imminent start to the Fed’s rate-cutting cycle.

Daily Digest Market Movers: Gold price struggles to gain any meaningful traction amid mixed cues

• The US Bureau of Labor Statistics (BLS) reported on Friday that non-farm payrolls (NFP) rose by 142,000 in August, compared to an estimated 160,000 and the previous month’s downwardly revised figure of 89,000.
• Other details of the report showed that the unemployment rate fell to 4.2% from 4.3% in July and wage inflation, as measured by the change in average hourly earnings, rose to 3.8% from 3.6% previously .
• According to CME Group’s FedWatch tool, markets are pricing in a roughly 70 percent chance of a 25 basis point rate cut by the Federal Reserve later this month, and a 50 bps cut is 30 percent.
• The US dollar, which initially fell after the jobs data, soon gained ground and traded slightly higher during the Asian session on Monday, which in turn is seen as a headwind for gold prices.
• Meanwhile, mixed US jobs data provided clear evidence of a sharp deterioration in the labor market and hurt investor sentiment amid lingering geopolitical tensions, providing support for safe-haven XAU/USD.
• Data released by the People’s Bank of China (PBOC) showed on Sunday that the country’s gold holdings stood at 72.8 million fine troy ounces at the end of August, unchanged for the fourth straight month.
• Meanwhile, markets reacted little to China’s latest inflation figures, showing consumer prices rose for a seventh straight month in August, while output price deflation persisted.

Technical Outlook: Gold price remains capped in a multi-week trading range around $2,500

Technically, the price of gold has been oscillating in a familiar range for the past three weeks or so. This constitutes the formation of a rectangle on the short-term charts and indicates indecision among traders on the next step of a directional move. However, price action within the range could still be categorized as a bullish consolidation phase on the back of a strong rally to the all-time high. Moreover, the oscillators on the daily chart – although they have lost their action – are still in positive territory. Therefore, any further slippage could still be seen as a buying opportunity near the horizontal support of $2,471-2,470.

The latter marks the lower limit of the trading range and should act as a key pivot point. A convincing break below could trigger some technical selling and expose the 50-day simple moving average (SMA) support currently pinned near the $2,443-$2,442 region. The downward trajectory could extend further towards the $2,400 round-digit mark en route to the 100-day SMA around the $2,390-2,389 area. On the other hand, any significant move up seems now to face strong resistance near the $2,520 region ahead of the $2,530-2,532 area or historical high. Some further buying will be seen as a new trigger for bullish traders and will set the stage for another short-term appreciation move.