Gold Price Forecast: XAU/USD eases modestly as sentiment sours

XAU/USD Current price: $1,940.55

• Concerns about European economic growth undermined the market mood.
• United States Nonfarm Payrolls are taking centre stage on Friday.
• XAU/USD battles to maintain its bullish poise around a critical Fibonacci resistance level.

XAU/USD eased modestly on Thursday as financial markets turned risk-averse. The US Dollar took some advantage over its safe-haven counterpart during American trading hours, although XAU/USD ranged for most of the day, currently trading at around $1,940 a troy ounce.

Concerns about European growth undermined the mood throughout the first half of the day, as inflation was higher than anticipated in August, according to preliminary estimates. The Harmonized Index of Consumer Prices (HICP) rose 5.3% YoY vs. the 5.1% expected by financial markets. The core annual reading printed at 5.3%, as expected. That puts the European Central Bank (ECB) between a rock and a hard place, as the central bank has been cooling down expectations for additional hikes amid the effects hikes have on economic progress.

Speaking of which, the ECB released the Accounts of their latest meeting. The document showed a further rate hike in September would be necessary if there was no convincing evidence that the effect of the cumulative tightening was strong enough to bring inflation down, consistent with a return to the 2% target. Still, market participants are largely beating on an on-hold stance.

On the other hand, inflation in the United States (US) eased as expected, suggesting the country will dodge a recession. The July core Personal Consumption Expenditures (PCE) Price Index was up by 0.2% MoM and 4.2% YoY, slightly higher than the 4.1% posted in June.

The focus now shifts to US employment figures. The country will release the August Nonfarm Payrolls report on Friday, which is expected to show 170K new positions were added in the month. The Unemployment Rate is expected to remain stable at 3.5%.

XAU/USD price short-term technical outlook

The daily chart for the XAU/USD pair shows that it retreated from around the 61.8% Fibonacci retracement of the latest daily slump at around 1,944.85, somehow anticipating a continued slide. The pair trades below a mildly bearish 100 Simple Moving Average (SMA) while above the 20 and 200 SMAs, both well below the current level. Finally, technical indicators turned flat within positive levels, reflecting the absence of directional strength.

In the near term, and according to the 4-hour chart, the risk skews to the downside. Technical indicators aim firmly lower, although still above their midlines. At the same time, the 20 SMA is crossing above the 200 SMA in the 1,930 price zone, reinforcing the next Fibonacci support at 1,933.30.

Support levels: 1,933.30 1,921.80 1,907.30  

Resistance levels: 1,944.85 1,955.80 1,972.40  

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