Article by: ETO Markets
Gold prices (XAU/USD) fell for a second day on Thursday, hitting a two-week low near $2,370. Despite the lack of obvious fundamental catalysts, technical selling was the main reason for the decline. However, risk aversion in market sentiment and expectations of a Fed rate cut in September could limit further declines. Global risk sentiment was affected by weaker-than-expected preliminary global PMI data released on Wednesday, adding to concerns of an economic slowdown and providing support for safe-haven metals. In addition, the market has fully expected the Federal Reserve to cut interest rates by 25 basis points in September, and is expected to cut interest rates again in November and December, which is also positive for gold.
From a technical point of view, gold's break below the 100-period Simple Moving average (SMA) on the 4-hour chart, the 50% retracement of the June-July rally and the support at $… triggered a new bearish signal. The oscillators on the daily chart are starting to turn negative, indicating the least downside resistance for gold prices. However, investors should be cautious and wait for the price to fall further below the 61.8% Fibonacci level near $… before considering more downside. Gold prices could fall further below the 50-day SMA and test the next support near $…. Conversely, any attempted rally could meet resistance at the round $... mark. A sustained break of this level could push gold back up to the 38.2% Fibonacci resistance of $…, which in turn would challenge the weekly high of $…. If a break above $… is reached, new short-term covering could push prices further toward medium-term resistance at $… - $…, with a shot at last week's all-time high of $….
