Gold Price Forecast: XAU/USD posting substantial gains as US data spurs concerns

XAU/USD Current price: $1,917.70

• S&P Global PMIs showed business activity contracted further in August, inflation pressures increased.
• US Treasury yields retreated sharply from the multi-year peaks posted earlier this week.
• XAU/USD is trading just below a critical inflexion point at $1,921.80.

Spot gold changed course on Wednesday, surging towards the current $1,920 price zone. The US Dollar traded with a soft tone throughout the first half of the day, as government bond yields continued to retreat, while Asian stock markets shrugged off the negative tone of their American counterparts and edged higher.

European indexes maintained an optimistic mood despite bad news for the Euro Zone. S&P Global published the preliminary estimates of the August PMIs, which were much worse than anticipated. Business activity in the region contracted at the fastest pace in over two years.

The USD fell further following the release of the United States (US) figures, as the Manufacturing PMI declined to 47.0, a two-month low, while services output slid to 51.0, a six-month low. According to the official report, “activity teetered near stagnation across the private sector” amid subdued client demand. Additionally, the report noted that “cost pressures regained some momentum as the rate of input price inflation quickened on the back of greater fuel, wage and raw material costs.”  

American stocks bared well with the news, retaining the green, while Treasury yields retreated further. The 10-year Treasury note currently offers 4.20% down 12 basis points (bps).

XAU/USD price short-term technical outlook

The XAU/USD pair is substantially higher, with the corrective advance extending through a daily descendant trend line coming from $1,982.15. The pair is nearing a critical inflexion point at $1,921.80, the 38.2% Fibonacci retracement of the $1,982.12/$1,884.77 slump. If Gold surges firmly past the level, the advance will likely continue in the following session. A strong retracement from the current area, on the other hand, should suggest the corrective advance is over and open the doors for fresh monthly lows.

The daily chart for XAU/USD shows that technical indicators extended their advances within negative levels and are about to cross their midlines into positive territory. Furthermore, a firmly bearish 20 Simple Moving Average (SMA) heads south, converging with the aforementioned Fibonacci resistance. Finally, XAU/USD recovered above a bullish 200 SMA, which hovers around the 23.6% retracement at $1,907.30.

In the near term, and according to the 4-hour chart, the pair is set to pause before finding new impetus. Technical indicators lost their directional strength after reaching overbought readings. At the same time, XAU/USD is trading just above a bearish 100 SMA, while the 20 SMA gains bullish traction far below the current level, skewing the risk to the upside.

Support levels: 1,907.30 1,898.10 1,884.75

Resistance levels: 1,921.80 1,933.30 1,944.85

View Live Chart for XAU/USD