Gold prices are showing different dynamics on Monday. At first, the precious metal fell sharply, but then regained most of the losses. This is due to profit-taking caused by expectations of an interest rate cut by the Federal Reserve (Fed) in September and escalating tensions in the Middle East.
Traders are now assessing the probable scope of the Fed’s monetary policy easing in September, which contributes to the profit-taking. As Friday’s data showed, the US job growth in July was below expectations. The unemployment rate rose to 4.3%. This could indicate that the labor market is weak and the economy is more vulnerable to a recession. This, in turn, strengthens the case for a rate cut at the Fed’s meeting on September 17–18.
According to the CME FedWatch tool, the probability of a 50-basis-point rate cut in September rose to more than 70% compared to 11.5% in the previous week. Lower interest rates reduce the opportunity cost of holding non-yielding gold bullion.
Meanwhile, concerns that the current situation in the Middle East could worsen persist. This supports strong demand for gold as a safe haven asset.
At the technical level, gold prices are forming a flat trend on the H4 chart. The price failed to break through the resistance at the level of 2,483.00 and pulled back from it. The Relative Strength Index (standard values) moved out of the oversold zone. In addition, the curve of the indicator went beyond its trend component, confirming the strength of the “bearish” sentiment.
Signal:
The short-term outlook for GOLD suggests selling.
The target is at the level of 2,350.00.
Part of the profit should be taken near the level of 2,390.00.
A stop-loss could be placed at the level of 2,490.00.
The bearish trend is short-term, so trade volume should not exceed 2% of your balance.
