• The price of gold is gaining value and is breaking a three-day losing streak on the back of subdued demand for the US dollar.
• Political developments in the US are leading to a sort of pullback in the “Trump trade” and weighing on the US dollar.
• Bets on a Federal Reserve rate cut in September are further weakening the US dollar and further supporting the underperforming XAU/USD pair.

Gold (XAU/USD) is attracting some buyers in Monday’s early session and for now appears to have halted a three-day corrective slide from an all-time high reached last week. Against the backdrop of dovish expectations from the Federal Reserve (Fed), US President Joe Biden’s withdrawal from the presidential race is prompting some investors to exit some Trump-win bets. This, in turn, is keeping US dollar (USD) bulls on the defensive and providing some support for the commodity.

In addition, concerns about slowing Chinese economic growth, geopolitical risks stemming from the prolonged Russia-Ukraine war, and ongoing conflicts in the Middle East are further supporting the safe-haven gold price. However, XAU/USD is not in a position to continue buying as investors await the release of the US Consumer Price Index (PCE) data on Friday for clues on the Fed’s policy path, which will determine the short-term trajectory for the low-yielding yellow metal.

Daily Market Factors Review: Gold bulls appear indecisive despite US political uncertainty and weaker US dollar

• A combination of supportive factors is helping gold attract buyers on the first day of the up-to-date week and snap a three-day losing streak, falling below $2,400, the lowest level in a week reached on Friday.
• The U.S. dollar came under fresh selling pressure in response to U.S. President Joe Biden’s withdrawal from the presidential race on Sunday, prompting investors to exit some trades betting on a Trump victory.
• Vice President Kamala Harris has solidified her position as the leading Democratic candidate in the presidential race, although former President Donald Trump remains the favorite in the betting market.
• Meanwhile, market participants have fully priced in the Federal Reserve’s September interest rate cut, which is helping to keep USD bulls on the defensive and supporting the XAU/USD pair.
• Still, the bullish tone in global stock markets is supporting the safe-haven commodity as investors await US consumer expenditure (PCE) data due on Friday.
• Key inflation data will impact expectations for a Fed rate cut, which in turn will boost USD demand in the brief term and provide up-to-date directional momentum for the commodity.
• Moreover, the release of flash PMIs this week should provide some clues about the health of the global economy and give the metal some impetus, allowing investors to capitalize on near-term opportunities.

Technical Analysis: Gold Price May Accelerate Downside Correction from YTD High After Breaking Support at $2390-2385

From a technical perspective, last week’s corrective decline from the all-time high has stalled below the $2,390-2,385 horizontal support. The aforementioned area coincides with the 50% retracement level of the June-July rally and the 100-period moving average (SMA) on the 4-hour chart, which in turn should now serve as a key turning point for short-term traders. A convincing break below would likely pave the way for deeper losses and take gold to the 61.8% Fibo level near $2,366-2,365, on its way to the $2,352-2,350 zone. Some continued selling would expose the 78.6% Fibo level near the $2,334-2,334 area before XAU/USD eventually falls to the $2,300 level.

On the other hand, any further move higher is likely to encounter some resistance near the $2417-2418 zone, above which a short-covering period has the potential to take gold into the $2437-2438 region. Sustained strength beyond the latter will be seen as fresh impetus for bullish traders and set the stage for a move to challenge the all-time high near $2482 reached on July 17, with some intermediate resistance near the $2458 region.