Gold price rebound are showing signs of recovery as they attempt to rebound after hitting a three-week low of $2,315. The precious metal is currently targeting $2,340, as market attention shifts to upcoming US economic data, which could provide insights into the Federal Reserve’s future interest rate decisions. This focus on key economic indicators has added some uncertainty to the market, but there are opportunities for gold to regain its footing.
Gold Price Stabilizes with Optimism on Upcoming US Data
Gold price rebound managed to stabilize during the Asian trading session on Wednesday, benefiting from a softer US Dollar and improving global market sentiment. This boost came after China’s Caixin Services PMI for May exceeded expectations, coming in at 54.0 versus the anticipated 52.6. A stronger economic outlook for China, the world’s largest gold consumer, is a positive signal for gold demand.
Additionally, market participants are optimistic ahead of the ADP private sector Employment Change data and the ISM Services PMI. With recent US economic data pointing to potential weaknesses, the possibility of a Federal Reserve interest rate cut in September has reemerged. Investors are closely monitoring these data releases, as they may impact gold prices by influencing Fed decisions.
US Economic Data Influencing Gold’s Direction
Recent US economic data has raised concerns about the strength of the economy. The Labor Department reported a decline in job openings, suggesting reduced labor demand. The ISM Manufacturing PMI also fell short of expectations, dropping from 49.2 in April to 48.7 in May. These indicators have fueled speculation that the Federal Reserve might adopt a more dovish stance, with a 56% probability of a 25-basis-point rate cut in September.
If the upcoming ADP jobs report and ISM Services PMI underperform on Wednesday, it could further weaken the US Dollar and boost gold prices. Investors will be watching closely for any signals from the Fed on interest rates, as these will significantly impact non-interest-bearing assets like gold.
Gold Price Technical Analysis: Potential for Bearish Correction
On the daily chart, gold prices have broken below the 50-day Simple Moving Average (SMA) support level of $2,335, signaling a potential bearish correction. The 14-day Relative Strength Index (RSI) has also dipped below the 50 mark, indicating increased downside momentum. If gold prices sustain a move below the recent low of $2,315, the next target could be around $2,300, with a further drop towards the May 3 low of $2,277.
Conversely, a recovery in gold prices would require a break above the 50-day SMA, now a resistance level at $2,337. A further rally could face challenges at the 21-day SMA, currently at $2,358, with a potential push toward the May 24 high of $2,364. A bullish breakout above $2,400 could signal stronger momentum for gold buyers.
Conclusion
The gold market remains sensitive to upcoming US economic data, as traders anticipate potential shifts in Federal Reserve policy. While the current trend points to a bearish correction, key resistance levels could provide opportunities for a rebound. Investors should remain cautious and closely monitor high-impact data releases that could influence gold prices.
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