Analysts indicate that U.S. Treasury yields significantly declined after the release of data from the Institute for Supply Management (ISM), which has become a key factor in the rebound of gold prices.
During Tuesday's early trading session in New York, spot gold prices plunged, hitting a low of $2,473.20 per ounce, down $33 from the day's high of $2,506.26 per ounce. However, gold prices rebounded strongly from the low, briefly reaching the $2,494 per ounce level, greatly narrowing the day's losses. By the end of the day, spot gold was at $2,492.65 per ounce, down approximately 0.3% for the day.
The ISM data released on Tuesday showed that August's Manufacturing PMI remained below the 50 threshold, indicating a slowdown in economic activity. However, the employment sub-index showed slight improvement, providing some reassurance to Federal Reserve officials concerned about a weakening labor market. August's ISM Manufacturing PMI rose from 46.8 to 47.2, below the expected 47.5.
Following the release of the ISM data, the yield on the U.S. 10-year Treasury note fell by 8 basis points to 3.84%. The decline in yields helped gold prices recover to $2,473 per ounce.
This week, a plethora of U.S. economic data releases are scheduled, including key indicators such as JOLTS job openings, ADP employment change, and non-farm payrolls (NFP). JOLTS job openings for July are expected to be 8.1 million, down from 8.184 million in June; August's ADP employment is expected to increase to 150,000 from 122,000 in July; and non-farm payrolls could rise to 163,000 from 114,000, with the unemployment rate potentially dropping to 4.2% from 4.3%.
Analysts at Commerzbank pointed out that if U.S. employment data underperforms significantly, speculation about a U.S. recession and a quicker rate cut by the Federal Reserve could resurface, further supporting gold prices.
Regarding gold trading strategies, FXStreet analyst Christian Borjon Valencia stated that although the trend for gold prices is upward, market momentum seems to favor sellers, which may drive gold prices down to $2,470 per ounce. The Relative Strength Index (RSI) shows that buyers currently dominate, but gold prices might still soften in the short term.
Valencia mentioned that if gold prices continue to hover below $2,500 per ounce, the next support level will be the low of $2,470 on August 22. Once this level is breached, the next target may point to the volatility lows around the convergence of the 50-day Simple Moving Average and August 15, located in the $2,427 to $2,431 range.
Conversely, Valencia noted that if gold prices break and sustain above $2,500 per ounce, the next resistance level will be the all-time high of $2,532, with further resistance at the $2,550 mark.
