Gold prices declined during the North American session as traders returned from the Labor Day holiday. The XAU/USD is currently trading at $2,490, down 0.34%, reflecting mixed market signals from the United States. Despite data indicating a contraction in business activity, the U.S. dollar gained traction.
The Institute for Supply Management (ISM) reported that the August Manufacturing PMI remained below the crucial 50-mark, signaling economic slowdown. However, the employment sub-component showed slight improvement, providing some relief to Federal Reserve officials concerned about labor market weakness. Fed Chair Jerome Powell, speaking in Jackson Hole, highlighted that employment risks remain tilted to the upside.
Interestingly, gold prices showed resilience, recovering from a low of $2,473, despite a drop in U.S. Treasury bond yields. The yield on the 10-year Treasury note fell to 3.84%, down eight basis points following the ISM report.
Market participants are closely watching the Federal Reserve’s next move. According to the CME FedWatch Tool, there is a 65% probability of a 25-basis-point rate cut at the September meeting, which could pressure the U.S. dollar and provide a boost to gold. However, 35% of traders are still positioning for a more significant 50-basis-point cut.
Analysts at Commerzbank suggest that a weaker-than-expected U.S. jobs report could revive concerns about a potential recession, leading to faster rate cuts and further support for gold.
This week promises to be eventful for the U.S. economy, with key reports including the JOLTS job openings, ADP National Employment Change, and Nonfarm Payrolls (NFP) figures.
Market Outlook:
ISM Manufacturing PMI: Improved slightly from 46.8 to 47.2 in August, though still below expectations.
JOLTS Job Openings: July’s figures are anticipated to be 8.10 million, down slightly from 8.184 million in June.
ADP Employment Report: Private hiring is expected to increase from 122K in July to 150K in August.
Nonfarm Payrolls: August’s NFP is expected to rise from 114K to 163K, with a possible decrease in the unemployment rate from 4.3% to 4.2%.
Fed Easing: December 2024 CBOT fed funds futures suggest investors are anticipating 98 basis points of easing this year.
Technical Analysis: Gold remains upwardly biased but is facing downward pressure, with potential to drop further below $2,500. The Relative Strength Index (RSI) indicates that buyers still have some control, but the near-term outlook could see XAU/USD weakening.
If the price falls below $2,500, the next support level is at $2,470, with further support around the $2,427-$2,431 range. Conversely, holding above $2,500 could see resistance at the all-time high, with the next significant barrier at $2,550.
