On August 22nd, in the morning session of the European market, spot gold prices continued their intraday correction trend, temporarily staying around $2505 per ounce. Although gold prices have fallen in the short term, the focus of the market has shifted to the upcoming release of US economic data, especially the initial US Purchasing Managers' Index (PMI) for August, which will be released at 21:45 Beijing time. In addition, the market is closely monitoring Federal Reserve Chairman Powell's speech at the Jackson Hole Conference on Friday to seek further guidance on future interest rate policies.

Market background

At present, the uncertainty of the global economy is still supporting the safe haven demand for gold, but due to the recent weak technical performance, the gold price has shown some downward pressure after approaching historical highs. However, analysts generally believe that the medium - to long-term upward trend of gold remains stable, especially against the backdrop of a possible interest rate cut by the Federal Reserve.

According to the latest data, the market still has strong expectations for the Federal Reserve to cut interest rates at its September meeting. The "Federal Reserve Watch" tool of the Chicago Mercantile Exchange Group shows that the market expects a 35% chance of a 50 basis point rate cut and a 65% chance of a 25 basis point rate cut by the Federal Reserve at its meeting on September 17-18. These expectations will continue to put pressure on the US dollar and indirectly support gold prices.

technical analysis

According to senior analyst Dhwani Mehta's analysis, although gold prices experienced a pullback in early Thursday trading, the technical side of the daily chart still leans towards bulls. Mehta pointed out that the price of gold has broken through the symmetrical triangle, and although the 14 day Relative Strength Index (RSI) has declined, it is still far above the 50 level, currently close to 63, indicating that the gold price still has opportunities to buy on dips.

The current gold price is facing a test of short-term support. Mehta pointed out that if the pullback momentum continues to strengthen, gold will first test the support level at Monday's low of $2486 per ounce. If the support level is breached, the gold price may further drop to $2467 per ounce, which is the support level transformed from the previous triangular resistance level. If the gold price continues to decline, the psychological barrier of $2450 per ounce will become the last line of defense for gold bulls.

At present, market participants are focused on the initial PMI data for August released at 21:45 Beijing time in the United States. Analysts generally expect that the initial value of the US service PMI in August will slightly decrease from 55 to 54, while the initial value of the manufacturing PMI is expected to remain unchanged at 49.6. If PMI data falls short of expectations, the US dollar may suffer another blow and push gold prices stronger.

In addition, the number of initial jobless claims and existing home sales data in the United States later on Thursday will also be the focus of market attention. It is expected that the number of initial jobless claims will rise to 230000 after quarterly adjustment for the week of August 17th, higher than the previous week's 227000, while the sales of existing homes in July are expected to increase at an annualized monthly rate of 0.3% after NAR quarterly adjustment. These data will provide investors with more clues about the health of the US economy, thereby affecting the trend of gold prices.

Mehta pointed out in his analysis that although gold prices may face some downward pressure in the short term, technically speaking, buyers still have an advantage. If the gold price can regain its historical high of $2532 per ounce, it is expected to further rise, with a first target of $2550 per ounce, and then possibly challenge the integer level of $2600 per ounce, or even the triangular target of $2660 per ounce.

Overall, although gold is facing technical pullback pressure in the short term, the overall upward trend has not changed. Before the upcoming release of US PMI data and Powell's speech, market sentiment remains tense, and investors should closely monitor the impact of these events on the market.