Article by: ETO Markets

In Asian trading on Monday, gold price (XAU/USD) fell below the psychologically key $2,500 level, largely under pressure from a stronger U.S. dollar. The strengthening of the dollar was helped by the release of the US personal consumption expenditure (PCE) data for July, which supported the dollar's gains despite being lower than expected. In addition, the sluggish performance of the Chinese economy, especially the weak manufacturing purchasing managers' index (PMI), further weighed on the demand for gold.

Also, expectations remain that the Fed will cut interest rates at its September meeting, which could limit gold's downside somewhat. As interest rates fall, the opportunity cost of holding non-yielding gold will decrease, which is positive for gold. The US ISM manufacturing and services PMI data for August, as well as the non-farm payrolls report on Friday, will be in focus this week, and these data could have an important impact on the short-term direction of gold prices.

From a technical point of view, gold is currently in a five-month upward channel, and despite the recent pullback, the overall trend remains bullish. The price of gold remains above the key 100-day exponential moving average (EMA), indicating that overall market sentiment remains bullish. In the short term, the key resistance for gold lies in the all-time high area of $…-…. If it can break through this area, gold is expected to rise further and test the psychological level of $…. On the downside, initial support is at $…, and a break below this level could lead to further declines to the $… and $… (100-day EMA) levels.