Gold price consolidates as focus shifts to US labor market data

• Gold price turns sideways after a solid recovery as investors await fresh triggers for further action.
• Fed’s Powell kept doors open for further policy tightening to ensure price stability.
• Fed’s Mester supports one more interest rate hike, though not necessarily in September.

Gold price (XAU/USD) turned lackluster after defending the critical support of $1,900.00 on Monday. The precious metal consolidates as investors prepare for crucial economic indicators such as Nonfarm Payrolls (NFP) and ISM Manufacturing PMI for August, which will be released later this week. The impact of August economic data will be very significant as Federal Reserve (Fed) Chair Jerome Powell reiterated at the Jackson Hole Symposium that further policy action will be data-dependent.

Jerome Powell at Jackson Hole said that the achievement of price stability has a long way to go. Powell kept doors open for further policy tightening if economic data continues to remain supportive. After Powell’s commentary, investors expect that the central bank could raise interest rates in November as a last nail in the coffin.

Daily Digest Market Movers: Gold price shifts focus to economic data

• Gold price consolidates above $1,910.00 as investors digest the impact of the hawkish commentary from Fed Chair Jerome Powell at the Jackson Hole Symposium.
• Powell’s speech was very much in line with market expectations. The Fed’s chair confirmed that the central bank can raise interest rates further as the job of ensuring price stability has not been completed yet but promised that policymakers will remain very careful in upcoming policy meetings.
• Powell also emphasized that incoming data will be a major factor for further policy action.
• The central bank has evidence that inflation is getting more responsive to labor markets. Powell said that further signs of a tightening job market could warrant more Fed action.
• About achieving price stability, Jerome Powell said that "inflation remains too high, the process of bringing down inflation still has a long way to go, even with more favorable recent readings."
• The precious metal could face some selling pressure as Cleveland Fed Bank President Loretta Mester said she supports one more interest rate hike, though not necessarily in September.
• As per the CME Group Fedwatch Tool, there is a more than 80% chance of the Fed keeping interest rates unchanged in September, while the majority of investors are betting on an interest-rate hike in November.
• Fed’s Mester said that, after being done with hiking rates, the central bank needs to hold rates for a while. The policymaker emphasized on achieving price stability by the end of 2025 and should not allow it to drift into 2026.
• About rate cut discussions, Fed Mester is in favor of re-evaluating it in the second half of 2024. She believes that the central bank has a good shot at attaining 2% inflation without damage to the real economy.
• Philadelphia Fed Bank President Patrick Harker supports holding interest rates steady as labor markets are cooling. Harker added that interest rates could be increased if inflation reaccelerates.
• As Jerome Powell talked about dependency on incoming data for further policy action, United States Nonfarm Payrolls (NFP) and ISM Manufacturing PMI data for August will remain in focus this week.
• US hiring has slowed down in the past few months, but the Unemployment Rate has remained at historic lows and wage growth has been strong.
• Factory activity has been contracting for the past nine straight months as US firms are operating at lower capacity due to a bleak demand outlook.
• Also, US firms are clearing their old inventories as expansion plans have been postponed due to higher borrowing costs.
• The US Dollar Index (DXY) remains supported around 104.00 and is expected to turn lackluster as investors prepare for crucial economic indicators.

Technical Analysis: Gold price consolidates around $1,915

Gold price turns sideways around $1,915.00 after defending the crucial support of $1,900.00 as investors digest Powell’s hawkish commentary at the Jackson Hole Symposium. On a broader note, the precious metal is auctioning in a range of $1,904-$1,922 from Thursday. The yellow metal made two consecutive Spinning Top candlesticks, signaling indecisiveness among market participants. The precious metal regains territory above the 200-day Exponential Moving Average (EMA) at $1,907 but the 20-day EMA at $1,916 is still restricting its upside potential.