Gold Bouncing After Testing the $1,900 Level Again

Since May, the price of Gold has been on a downtrend, and towards the beginning of August, the decline accelerated, sending XAU/USD below $1,900. The economic data from the US has shown that the US economy appears to be holding up well, which has been keeping the USD bullish and other assets on a declining trend. The fact that Gold prices continue to make lower highs indicates that sellers are in charge.

During late August we saw a retreat higher in the price of Gold, rising over $1,950. However, the 100 daily SMA (green0 acted as resistance on the daily chart, stopping the climb and the economic data from the US keeps coming in strong, indicating that the US economy is not even “thinking” about a recession. This week the producer inflation PPI and the anticipated consumer inflation CPI increased again, as did retail sales, indicating that the US consumer remains strong despite higher prices. As a result, the US dollar has been moving higher, which continues to drive down the price of Gold.

Investors have turned their attention to the August consumer spending data, which will help to further unravel the FED interest rate conundrum. The present cycle of high interest rates is failing to meaningfully reduce consumer spending and the demand for workers. According to data from the US Department of Labor released on Thursday, the number of people requesting unemployment benefits for the first time increased by 220K, when investors had predicted a rise to 225K.

This and other employment reports recently suggest that the labour sector is strong, which left the USD bullish. As a result, Gold dipped below the 200 SMA (purple) on the daily chart although the decline stopped just above $1,900. So, we remain bearish in Gold and will continue to sell retraces higher as we have done in recent months, which has been proving to be a good strategy until the trend shifts.

GOLD