Gold traders are taking it easy on the first trading day of the week because there are a number of important economic events that will impact the precious metal price. The dollar index has shown strength in light of recent data, but gold traders are still very optimistic that gold prices will continue to move higher given that the precious metal has remained above important price points in the past week.
Background
The price of the precious metal has been trading above the 2,500 level, which many traders consider highly important for a variety of reasons. First of all, it is an important psychological price point because it shows the strength of the overall price trend. Secondly, gold traders believe that as long as the price continues to trade above these important price points, the odds are that it will continue its bull run for the rest of the year. However, many speculators believe that gold bulls must face reality, and the ugly truth for them is that most of the optimism about the gold price moving higher on the back of the potential Fed interest rate cut is based on the price, so when the event happens, we may actually make a move to the downside.
Firecrackers
Gold prices are down nearly 0.4% at the time of writing this report, and they are trading below an important price level of 2.500 but by a small margin, currently at 2,498. This month, we expect the Fed to reverse the cycle of rate hikes, a move they have not made since COVID. The US interest rates are at their multidecade high, which has significantly strengthened the dollar index and negatively impacted the price of gold. But this year, there has been anticipation that the Fed will cut interest rates, and speculators have been holding on to the belief that the Fed will cut interest rates more aggressively.
Last month, the Fed Chairman confirmed openly that the time has come for a change, which means that the Fed will be lowering the rates this month. In his speech, he made it clear that the Fed is very satisfied with the inflation performance, which is how it has come down from its multi-decade high level to its current level. However, what made speculators a lot more excited about the gold price is the fact that the Fed Chairman said that he doesn’t expect more weakness in the US labour market. The US weekly jobless claims data last week, along with other labour market data released in August, confirmed the possibility of recent cracks in the US labour market. Speculators interpret this as a sign that the Fed could face pressure to act more aggressively, a move they have consistently avoided.
The market currently expects the Fed to cut interest rates by 25 basis points, but many think that the US labor market data and the US NFP data, which are due on Friday, will determine the pace of the interest rate cut. This is the most significant economic week for the US dollar index and the gold price.
However, before we receive the US NFP data, we also have other significant releases, including the US ADP data, JOLTS data, and the US Services number. All of them are very likely to increase chatter about a deeper interest rate cut by the Fed, especially if the numbers don’t live up to expectations.
Technical Matters
As previously mentioned, technical traders are closely monitoring significant price levels and their potential impact on the price action.
On the weekly chart, we can see that last week, there wasn’t much of an action for the gold prices as bigger bets have stayed very much on the sidelines, and this is because traders believe that most of the good news, especially if there is only an interest rate cut of 25 basis points, is already baked into the price.
Speaking strictly, on the 4-hour time frame, the price is in an ascending triangle pattern, which means that there are chances for the price to break to the upside. However, the bulls do not feel very comfortable because the price is trading below the 100-day SMA in the 4-hour time frame. Keeping an eye on the resistance
