XAU/USD remains on the defensive above $1,700, according to the US ISM PMI, with markets all on attention.
- The price of gold deals with water after the start of the main week on a softer basis.
- The European energy crisis and conflicts between the US and China are weighing on sentiment but the US holiday is constraining market movements.
- Recession fears, hawkish Fed bets support DXY’s strength.
- US ISM Services PMI for August, awaiting US traders’ reaction to recent developments.
Gold price (XAU/USD) remains marginal at around $1710, defensive after a softer start to the week, as traders await key US data and the return of full markets on Tuesday. However, the losses of the yellow metal can be linked to escalating recession fears in Europe and the growing tension between the United States and China, not to mention fears of aggressive interest rate hikes by the US Federal Reserve.
Russia’s halt to energy supplies to Europe has exacerbated the situation in the old continent after it joined with the leaders of the Group of Seven to announce a ceiling on Moscow’s oil prices. It also exacerbated the European energy crisis, waning hopes for an oil deal between the United States and Iran and production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known collectively as OPEC+.
Elsewhere, disagreements between the United States and China over the trade deal and Taiwan escalated Monday as the Biden administration announced its intention to continue tariffs under Trump for now. These definitions were screened for removal and indicated potential improvement in relations previously.
Moreover, the willingness of the United States to sell arms to Taiwan and to enter Taipei without a visa for some friendly residents of the country, including the United States, has provoked Beijing to express harsh words on US-Taiwan relations and heightened the rifts.
Instead, Friday’s mixed US jobs report and the People’s Bank of China (PBOC) cutting its foreign exchange reserve requirement rate by 200 basis points to 6% from 8% starting Sept. 15, according to Reuters, is limited. downward movement.
Amid these plays, European stocks were lower and bond yields firmer while the US Dollar Index (DXY) refreshed a 20-year high.
Looking ahead, full markets reactions to recent recession fears and softer US data on Friday will be crucial to watch for XAU/USD traders. Also significant will be the ISM Services PMI for August, expected 55.5 vs 56.7 previously. With looming recession fears and mounting geopolitical tension, any increase in data could renew the Fed’s hawkish bets and favor gold buyers.
Also Read: ISM Services PMI Preview: Bar High to Help Dollar Bears Pass and Seize the reins
Gold prices are oscillating within a 2-day symmetrical triangle as traders await the return of full markets.
In addition to the triangle area between $1,709 and $1,715, the 50-HMA and the 200-HMA are also constraining the short-term movements of XAU/USD around $1,707 and $1,727 in that order.
However, it is worth noting that the bearish MACD signals and the commodity’s pullback from the 38.2% Fibonacci retracement of August 25 to September 1, around $1,718, also remain bullish.
However, the downside breakout of the $1,707 support that comprises the 50-HMA will not hesitate to pull the price towards the monthly low near $1,688 before highlighting the yearly low set in July near $1,680.
Meanwhile, a recovery is still elusive until it crosses the 200-HMA barrier near $1,727, and a break of it may push XAU/USD buyers towards the end of August swing high near $1,745.
The bears control the gold, but the space to the south is limited.
Gold: hourly chart
Trend: Expect more weakness