Article by: ETO Markets

With the Labor Day holiday in the United States leading to reduced market volume, gold prices (XAU/USD) fell slightly to $2,499 during the North American trading session. Market participants are closely watching a slew of important US economic data due to be released this week, including ISM manufacturing and services PMIs, JOLTS job openings, ADP employment changes, and non-farm payrolls (NFP). The data will have an important impact on the Fed's decision on interest rates, especially in the context of Fed Chairman Jerome Powell's previous comments that inflation risks are skewed to the downside and employment risks to the upside. While recent strong U.S. economic data has eased fears of a recession, expectations remain that the Federal Reserve may continue to cut interest rates in September, which could limit the downside for gold prices. In addition, the continued presence of geopolitical risks in the Middle East, especially the tensions between Israel and Hamas, may also provide some safe-haven support for gold.

From a technical point of view, while gold is currently holding below the psychologically key $… level, the overall trend remains skewed to the downside. The relative Strength Index (RSI) shows momentum has turned negative, suggesting further declines are likely in the near term. If the XAU/USD breaks below $…, the next support level will be $…, the August 22 low. Further declines could test the $… to $… area, a position that includes the August 15 swing low and the 50-day Simple Moving average (SMA). Conversely, if gold is able to rebound and hold above $…, the upside target in the near term would point to $…, with further resistance near $….