GOLD : Support Zone

(Thu, 3 Sept 2020). Gold price action paced a 1.5% decline on Wednesday after rejecting $2,000 the prior session. XAU/USD dropped despite falling interest rates as the US Dollar strengthened broadly. Gold might bounce off technical support and break away from its consolidation pattern.

Gold has turned lower during Wednesday’s trading session and set for a 1.5% decline. This follows gold rejecting the psychologically-significant $2,000-price level yesterday. A rebound set forth by the broader US Dollar could partly explain downward pressure felt by gold and XAU/USD price action over the last few hours. Question marks arising over potentially subdued future inflation expectations might be weighing negatively on gold prices as well.

GOLD PRICE CHART: DAILY TIME FRAME (26 MAR TO 02 SEP 2020)

With sovereign interest rates creeping back lower and economic conditions staying solid overall, however, real yields might continue their larger decline. Falling real yields stand out as a primary fundamental driver likely to help gold advance back toward all-time highs. That said, gold price action is now flirting with a key zone of technical support underpinned by a confluence of the 8-day moving average and 34-day moving average.

This area could provide buoyancy to XAU/USD with the precious metal printing a series of higher lows over the last three weeks. Topping the August 18 close near $2,010 per ounce might encourage gold bulls to set their sights on fresh record highs. On the other hand, a breakdown of the symmetrical triangle consolidation pattern, perhaps identified by a close below the $1,920-price level, could suggest more turbulence ahead for gold.

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