Spot Gold Forecast: Bullion Looks to extend correction

Spot Gold Forecast: The US markets will be closed due to the Labor Day holiday on Monday and as such market action is likely to remain subdued. In the early trading hours of the Asian session on Tuesday, the Caixin Services PMI data from China will be watched closely by market participants. A reading below 50 could remind investors of the slowdown in the world’s second-biggest economy and hurt gold. On the other hand, an unexpected improvement in the data could help the market mood improve, providing relief for the precious metal.

Release Report

On Wednesday, the ISM will release the August Services PMI report for August. Markets paid close attention to the headline PMI and the Employment Index component of the ISM’s Manufacturing PMI and a similar reaction could be witnessed. Analysts forecast the ISM Services PMI to edge lower to 54.5 in August. The Employment Index, which stood at 49.1 in July, could weigh on the greenback if it stays below 50 for the third straight month. FOMC Chairman Jerome Powell is scheduled to deliver a speech at 1310 GMT on Wednesday as well.

Interest Rate Decision

The European Central Bank (ECB) will announce its interest rate decision on Thursday. In the past week, ECB officials voiced their willingness to consider a 75 bps rate hike. With the euro area inflation continuing to rise amid the ongoing energy crisis, the ECB could opt to deliver a hawkish message. In that scenario, the shared currency could capture some of the capital outflows from the dollar. It’s worth noting, however, that a hawkish ECB message could trigger a leg lower in the XAU/EUR pair. Even if the dollar were to lose interest after the ECB event, gold could find it hard to gather bullish momentum depending on XAU/EUR’s reaction.

There won’t be any high-tier macroeconomic data releases on Friday and the risk perception alongside the action in US Treasury bond yields could impact gold’s valuation ahead of the weekend.

Gold Technical outlook

The Relative Strength Index (RSI) indicator turned north and recovered to 40 after testing 30 on Thursday. This technical development suggests that gold could extend its upward correction in the near term. On the upside, the 20-day and the 50-day SMAs form an important resistance area at $1,760. A daily close above that hurdle could open the door for an extended rebound toward $1,785 (Fibonacci 23.6% retracement of the latest downtrend) and $1,800 (psychological level, 100-day SMA).

$1,690 (psychological level, end-point of the latest downtrend) aligns as significant support. In case gold (Yellow Metal) falls below that level again and confirms it as resistance, it could target $1,685 (July 21 low).


Following this week’s action, experts expect gold to continue to fall next week with the MCXMoney Forecast Poll pointing to an overwhelmingly bearish outlook on the one-week view. The one-month report paints a sideways picture but the average target sits at $1,685.

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