XAU/USD corrective slide may extend below $2,600

XAU/USD Current Price: $2,636.30

• Stock markets struggle to extend early week gains.
• US employment data is in focus after the Fed cut interest rates.
• XAU/USD in a corrective phase, further slides on file with $2,575 in sight.

The price of gold fell for the second day in a row, trading at around $2,635 in the mid-US session. The shiny metal softened despite a mixed mood in the market. Financial markets are generally upbeat amid interest rate cuts in major economies. Investors also welcomed Chinese stimulus measures announced last week aimed at reviving the battered economy.

However, stock markets are struggling at the start of the new week. Most Asian indexes closed in the green, although Japanese ones fell on news that former defense chief Shigeru Ishiba had won the Liberal Democratic Party (LDP) presidential election. The incoming prime minister is expected to favor raising interest rates by the Bank of Japan (BoJ), affecting demand for stocks.

Meanwhile, European indexes edged lower on warm news from the automaker sector, while big names painted a bleak picture of earnings going forward. As a result, the United States (US) index is trading at a loss, supporting the US dollar’s lead against most major rivals.

In the coming days, however, the focus will shift away from stocks and onto US employment data. The country will release the JOLTS job opening report and the ADP National Employment Report on private job creation ahead of the release of non-farm payrolls (NFP) on Friday. The US labor market situation may become less worrisome after the Federal Reserve (Fed) offered a 50 basis point (bps) interest rate cut when it met in September.

Finally, it’s worth remembering that China celebrates Golden Week starting Tuesday, October 1, meaning local markets will remain closed for the rest of the week, limiting price action after the Wall Street close.

XAU/USD Short Term Technical Outlook

Technically, the daily chart for the XAU/USD pair shows that the recent decline could be classified as corrective, but with the possibility of further declines in the coming days. Technical indicators have abandoned overbought territory and are heading firmly south, albeit well into positive territory. At the same time, the moving averages maintain their firm upslopes well below current levels, limiting gold’s medium-term bear potential. The 20 simple moving average (SMA) is currently around $2,575 and an approach to it should attract buyers.

In the short term, and according to the 4-hour chart, the risk is also tilted to the downside. XAU/USD dipped below a now slightly bearish 20 SMA while holding above the 100 and 200 SMA. Technical indicators, meanwhile, fell well into negative territory, keeping the bearish force flat. The daily low of $2,628.66 provides immediate support.

Support levels: 2,628.60 2,611.90 2,598.70

Resistance levels: 2,653.70 2,665.95 2,685.45