XAU/USD maintains gains near new highs

XAU/USD Current Price: $2,548.15

• The European Central Bank has cut interest rates, reiterated that it will remain dependent on data.
• The US producer price index rose more than expected on a monthly basis in August.
• XAU/USD has declined modestly from a new all-time high and is maintaining bullish strength.

Spot gold rose to a new all-time high of $2,555.11 on Thursday, following the monetary policy announcement by the European Central Bank (ECB) and relevant macroeconomic figures from the United States (US). However, the news had limited impact on FX as it lacked a surprise factor. However, XAU/USD rallied, finding further support on the weak performance of US indices after the Wall Street open.

On the one hand, the ECB decided to cut the deposit facility rate by 25 basis points (bp) to 3.5%, as expected. However, the interest rate on the main refinancing operations was cut by 60 bps to 3.65%, while the interest rate on the marginal credit facility was also cut by 60 bps to 3.9% from 4.5% previously. The decision could be considered conciliatory, but it did not have a negative impact on the euro.

On the other hand, the US reported that the August Producer Price Index (PPI)h rose 1.7% from a year earlier, below the 1.8% expected and below the previous 2.1%. On a monthly basis, the PPI rose 0.2%, slightly above the 0.1% expected. Additionally, initial jobless claims for the week ended September 6th met expectations by printing 230K. The numbers supported a Federal Reserve (Fed) interest rate cut next week, but not enough to revive hopes for an aggressive 50 basis point cut. The US dollar subsequently fell.

Meanwhile, Asian and European shares rose, compliments of a firm recovery in the technology sector. US indices, however, failed to follow the positive lead, with the Dow Jones Industrial Average and the S&P500 posting modest losses throughout the day.

XAU/USD Short Term Technical Outlook

XAU/USD is trading a handful of dollars below the aforementioned record level, maintaining its bullish stance. The daily chart shows that it met with buyers around the 20 Simple Moving Average (SMA) for the sixth consecutive day, while the 100 and 200 SMAs continue to head north, well below the shortest. Technical indicators, meanwhile, picked up bullish momentum with plenty of room to extend gains.

The 4-hour chart for the XAU/USD pair shows that the risk is tilted to the upside. The 20 SMA is rising above a flat 100 SMA over $30 below the current level, while the 200 SMA is grinding north well below the other two. Finally, technical indicators maintain their sharp upward slope, with the Relative Strength Index (RSI) indicator approaching overbought readings. However, there are no signs of bullish exhaustion, with buyers likely adding pullbacks and targeting higher highs.

Support levels: 2,535.10 2,521.85 2,507.20

Resistance levels: 2,555.10 2,570.00 2,585.00