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Gold Price Alert: USD Eyes Fed Meeting – XAU/USD Analysis

Gold price alert U.S. dollar strengthens, traders monitor key technical levels in XAU/USD amid economic indicators and Fed policy outlook.

Key points

  • Gold prices are stagnant as the U.S. dollar strengthens.
  • Strong economic data bolsters the U.S. dollar.
  • Fed may hike rates in November, impacting gold.

Gold Price Alert-USD Eyes Fed Meeting – XAU/USD Analysis

The U.S. dollar’s ascent to multi-month highs is unsettling traders, potentially triggering a significant shift in gold prices. Despite robust U.S. economic data, uncertainty lingers in the precious metals market. On Thursday, gold prices, by XAU/USD, lacked directional momentum, hovering just below the crucial $1,910 mark, marking a two-week low. The strong U.S. dollar performance in foreign exchange markets, coupled with rising U.S. Treasury yields, particularly the 10-year government bond nearing the 4.30% threshold, restrained the value of gold.

The surge in the U.S. dollar, measured by the DXY index, pushed past the 105.00 handle, reaching levels not seen in over six months. This impressive ascent followed robust wholesale inflation and retail sales data, alongside better-than-expected unemployment claims, highlighting the remarkable resilience of the U.S. economy.

However, despite these positive economic indicators, the Federal Reserve’s monetary policy outlook, as reflected in fixed-income markets, has yet to see a substantial upward revision. This could change if incoming data fails to reflect a significant slowdown in economic activity and a sustained reduction in overall price pressures.

At present, market expectations do not anticipate any action from the Federal Reserve in September. Still, there is a 32% probability assigned to a quarter-point interest rate hike at the November FOMC meeting. These expectations may increase if the strong economic momentum observed during the summer continues into the fall, potentially keeping gold prices under pressure for an extended period.

Technical Analysis

Gold saw a modest August rebound, but its upward momentum halted due to an unsuccessful attempt to breach trendline resistance. This setback resulted in prices slipping below the crucial 200-day simple moving average earlier this week.

XAU/USD has been following a downward trajectory in recent days, with prices approaching Fibonacci support at $1,895. This level represents a key support zone defined by the 38.2% retracement of the rally from September 2022 to May 2023. While it may act as a robust barrier against further declines, a breach of this support could intensify bearish pressure, potentially leading to a retreat towards $1,855.

In the event of a bullish reversal, initial resistance is seen between $1,920 and $1,930. Successfully surpassing this technical hurdle could reignite buying interest, setting the stage for a move towards $1,955. Further strength would shift the focus to $1,985, followed by the psychologically significant level of $2,000.

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