Article by: ETO Markets
Gold edged down in Asian trading on Tuesday, mainly as fading expectations for the US Federal Reserve to cut interest rates by 50 basis points in September helped the US dollar strengthen. The dollar benefited from mixed US jobs data released on Friday, which dampened market expectations of a big rate cut, putting pressure on gold, a non-interest-bearing asset. In addition, the positive performance of global equity markets has also weakened the safe-haven demand for gold. However, investors are still awaiting the release of U.S. consumer price index data this week, which could provide further guidance on the Fed's monetary policy direction. As a result, the market is likely to remain cautious ahead of more economic data.
Nevertheless, the expectation that the Fed is about to start a rate cut cycle still limits the downside of gold. According to CME Group's FedWatch tool, the market has a 71 percent probability of a 25 basis point Fed rate cut in September and a 29 percent probability of a 50 basis point cut. Speeches by several Fed officials also suggested that the time for a rate cut may have arrived, although the size remains to be further determined.
From a technical point of view, the range-bound movement of gold prices over the past three weeks has formed a rectangular consolidation pattern on the daily chart, indicating that the market is in a consolidation phase. Combined with previous strong gains, this move can be seen as a bullish consolidation phase. The oscillators on the daily chart remain in positive territory, confirming a bullish outlook in the short term. However, until gold breaks through the key resistance of the $…-$… area (the all-time high), it is difficult to determine a further uptrend.
The lower support is near $… and further support is at $…. A break below this support area could trigger technical selling and push gold further lower, targeting the current support near the 50-day Simple Moving Average (SMA) around the $… area.
