gold prices are gaining momentum as they strive for a sustainable move above the significant $2,500 level during Thursday’s Asian trading session. This surge in gold is closely linked to the increasing expectations of a substantial interest rate reduction by the Federal Reserve in September. Market participants are keenly awaiting key economic indicators, particularly the US ADP Employment Change report and the ISM Services PMI, which may influence gold ’s trajectory.
After initially dipping below the critical short-term support level of $2,485, gold quickly rebounded, reflecting a broader trend of a weakening US Dollar driven by heightened anticipation of a 50 basis points rate cut at the upcoming Federal Reserve meeting. Recent economic data, including a dismal ISM Manufacturing PMI report and a significant decline in US Job Openings, adds to the prevailing bearish sentiment toward the dollar. The Job Openings and Labor Turnover Survey (JOLTS) revealed that job vacancies fell to their lowest levels in three and a half years, further solidifying market speculation that the Fed may adopt a dovish stance.
The dollar continues to struggle in the face of fresh selling pressures, exacerbated by recent comments from influential Federal Reserve officials about necessary rate cuts in light of declining inflation and a slowing economy. This backdrop makes the upcoming Nonfarm Payrolls and wage data crucial, as they are expected to provide further insights into the labor market’s health and the potential size of the Fed’s rate changes.
From a technical perspective, gold ’s outlook remains favorable for buyers. The 21-day Simple Moving Average is currently acting as a crucial support level. For gold to maintain its upward momentum, it must consistently close above the $2,500 level, with key resistance levels noted at $2,532 and $2,550. However, should momentum shift downward, a close below the 21-day SMA could lead to a retest of the week’s low near $2,472, signifying potential further declines if support levels at $2,460 give way.
