On Thursday, spot gold closed down $27.45, or 1.09%, at $2484.74 per ounce, with an intraday low of $2470.82 per ounce. FXStreet analyst Christian Borjon Valencia noted that spot gold experienced a pullback on Thursday due to rising U.S. Treasury yields. The gold price briefly fell below the previous historical high of $2483 per ounce.
Data from the U.S. Bureau of Labor Statistics (BLS) showed that initial jobless claims for the week ending August 17 were higher than expected. Standard & Poor's Global data indicated that despite U.S. manufacturing activity contracting for the second consecutive month, business activity remains robust. The manufacturing PMI for August fell to 48.0, while the services PMI rose to 55.2, exceeding expectations.
Valencia stated that after the U.S. data release, rising Treasury yields drove the dollar higher, which in turn pressured gold prices. The 10-year benchmark Treasury yield rose 6.5 basis points to 3.865%. The U.S. Dollar Index (DXY) increased by 0.39% to 101.52.
Valencia analyzed that profit-taking might be a major reason for gold prices falling below $2500 per ounce, especially on the eve of Powell's speech. Traders are digesting the minutes of the Federal Open Market Committee (FOMC) meeting released on Wednesday. The minutes revealed that if the data meets expectations, "the vast majority" of FOMC members support easing policy at the September meeting. Policymakers' views on inflation risks are trending downward, while the risks to achieving maximum employment are rising.
Attention on Powell's Speech
Valencia mentioned that investors are focusing on Federal Reserve Chair Powell's speech at the Jackson Hole symposium, expecting him to provide guidance on monetary policy for the remainder of 2024. Powell will speak at 10:00 AM Eastern Time on August 23 (10:00 PM Beijing Time on Friday). The market anticipates that this speech could pave the way for a Fed rate cut in September.
Powell might challenge the market’s expectations of a 50-bps rate cut and indicate that they may ease policy at a measured pace. If so, the dollar and Treasury yields might rise, while gold could face pressure.
Bank of America Merrill Lynch believes that Powell’s speech will focus on "labor market stability," and a stronger stance on preventing labor market weakness would be seen as an important policy signal.
Goldman Sachs noted that the market might look for "confidence in rate cuts" and "data dependence" from Powell’s speech, expecting his message to be similar to the past few weeks, with the Fed nearing a rate cut but the extent of easing depending on future data.
Gold Trading Strategy
Valencia indicated that despite gold prices falling below $2500 per ounce, the uptrend remains intact. Although the Relative Strength Index (RSI) is bullish, it points downward, suggesting that sellers are dominant in the short term. However, the medium-term outlook for gold remains bullish.
If the gold price closes below $2483 per ounce on a daily basis, it could trigger a deeper correction, with sellers potentially pushing the price to the May 20 high of $2450 per ounce. If it falls below $2450 per ounce, gold might decline further, testing the 50-day Simple Moving Average (SMA) support at $2398 per ounce and the 100-day Moving Average support at $2377 per ounce.
On the other hand, if buyers push gold above $2500 per ounce, the price may test the historical high of $2531 per ounce again.
