Gold has become Range-Bound After Breaking Above $2500

On August 16, gold surged by $51, pushing gold futures above $2500 per ounce for the first time in history. This move converted the previous major resistance level of $2510 into a new major support level. By the following Tuesday, the most actively traded December gold contract reached $2561.40, establishing the current major resistance level.

Gold is now trading within a narrow range, oscillating between the support level at $2500 and the resistance level at $2560. This consolidation phase is significant as it has established a solid base at $2500, which has held up under multiple tests. Meanwhile, the $2560 ceiling, marked by the recent peak, has proven to be a strong obstacle to further price increases.

Gold’s prices has been influenced by economic data

Recent economic data has significantly influenced gold's market movements. The latest nonfarm payrolls report from the U.S. Bureau of Labor Statistics, a key metric for the Federal Reserve, fell short of expectations. While economists had forecasted an addition of 160,000 jobs in August, the actual increase was just 142,000, which could impact future monetary policy decisions.

1. The unemployment rate
The unemployment rate The unemployment rate edged down from 4.3% to 4.2%, but this remains elevated compared to the 3.8% rate a year ago. The number of unemployed individuals has risen from 6.3 million to 7.1 million over the past year, reflecting ongoing labor market challenges.

2. Economic figures
These labor market figures, combined with the recent Consumer Price Index (CPI) report showing inflation at a three-year low, have reinforced expectations for an imminent interest rate cut by the Federal Reserve. This anticipation was further bolstered by Fed Chair Jerome Powell's remarks at the Jackson Hole symposium on August 24, where he suggested that "the time has come for policy to adjust."

3. Probability of a rate cut
Market sentiment, as indicated by the CME's FedWatch tool, now shows a 100% probability of a rate cut in September. The tool estimates a 70% chance of a 25-basis point reduction and a 30% chance of a more substantial 50-basis point cut. These probabilities have shifted notably following the latest economic reports, with the likelihood of a larger cut decreasing from 40% to 30%.

Monetary policy expectations

The anticipation of a rate cut has impacted precious metals markets. Gold futures for December delivery settled at $2526.80, down by $20.30 or 0.80%. Silver futures for December fell more sharply, decreasing by 3.07% or 89.5 cents to settle at $28.20.

As the market processes these economic indicators and monetary policy expectations, gold's performance in the coming weeks will be closely monitored. The established support at $2500 and resistance at $2560 are likely to continue shaping trading patterns. Investors and analysts will be watching to see if gold can break out of its current range or if it will retrace to lower levels based on upcoming economic data and Federal Reserve decisions.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.