Gold price is extending its losses for the second day after the US Dollar continued from its strong showing on Friday, buoyed by the Non-Farm Payrolls report which was better than the markets had anticipated.
Gold price action as depicted on the XAUUSD chart has erased some of its gains for the second day running. It has shed 0.2% or $4.01 as at the time of writing in what has been a choppy day of trading. Gold price has met resistance at the $2050 zone on the day and now trades at 2030.70, well off record highs posted on Thursday last week at the 2075.14 mark.
Following an initial spike, the US Dollar has lost some steam in the NY session, allowing the gold price to pick up from intraday lows at 2019.20. As it is, gold is having a day without clear-cut directional bias, despite an escalation in US-China tensions with the Chinese sanctioning of 11 Americans, including Senators Marco Rubio and Ted Cruz. Over the weekend, Hong Kong entrepreneur and media tycoon Jimmy Lai became one of the first casualties of China’s new National Security Law.
President Trump’s signing of the stimulus bill under an emergency clause did not evoke much positive reaction on US markets and seemed not to have affected the sentiment on the XAUUSD pair at the moment. Traders may be waiting for a response from Washington over the latest event in Hong Kong for further market direction. Other activities within the week could also define price action on gold.
Technical Outlook for Gold Price
The main trend for the XAUUSD pair remains unblemished, as the intraday low for the day and subsequent bounce coincided with expected price behaviour at the 23.6% Fibonacci retracement level from the 14 July swing low to the 7 August swing high. Today’s move is an outside day bearish candle that follows up from the bearish engulfing pattern formed by the Thursday and Friday candles of last week. Moreover, the fundamentals remain intact.
The steepness in the bullish moves posted in the past week indicate the potential for a more significant price correction. This would depend on an improvement in the fundamentals backing the US Dollar, and a breakdown of the support formed by the 23.6% Fibonacci retracement level. This would open the door towards the 1966.16 price level (38.2% Fibonacci retracement), with 1932.32 and 1898.48 constituting potential distant targets to the south.
On the flip side, renewed advance following from today’s bounce allows for a retest of today’s resistance at 2050, with the possibility of a push to retest the record highs at 2075. A weak US Dollar, continued worsening of the coronavirus pandemic numbers in the US and around the world, as well as the news surrounding the enhanced stimulus package will continue to be the main fundamentals behind gold price action.
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Gold Price Chart (Daily)
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