• Gold prices fall in Monday’s Asian session.
• A stronger US dollar is dragging down the yellow metal, while the Federal Reserve’s dovish stance could limit its declines.
• Traders will focus on US PMI data ahead of the employment report due on Friday.

Gold (XAU/USD) continued to fall below the psychological $2,500 level on Monday. A stronger Greenback following the July US Consumer Expenditures (PCE) index weighed on the precious metal. In addition, concerns about a sluggish economy in China, the world’s largest buyer of gold, are contributing to the decline in the precious metal.

However, rising expectations of a US Federal Reserve (Fed) interest rate cut at its September meeting could lend a hand limit gold losses as lower interest rates reduce the opportunity cost of holding non-yielding gold. Looking ahead, the US ISM Manufacturing PMI for August is due on Tuesday, while the Services PMI is due on Thursday. Attention will shift to US employment data on Friday, including Nonfarm Payrolls (NFP), Unemployment Rate and Average Hourly Earnings for August.

Daily Market Factors Review: Gold Price Falls on US PCE Inflation Report

• Protests have broken out across Israel after the country’s military recovered the bodies of six hostages Hamas killed in the Gaza Strip. Israel’s largest labor group has called for a strike, saying “the entire Israeli economy will be shut down” on Monday, according to CNN.
• China’s Purchasing Managers’ Index (PMI) for the manufacturing sector fell to 49.1 in August from 49.54 in July, missing the market consensus of 49.5. The services PMI rose to 50.3 in August from 50.2 in earlier months, beating estimates of 50.0.
• Data released on Friday by the US Bureau of Economic Analysis showed that the US Consumer Price Index (PCE) rose by 2.5% year-on-year in July, compared with the previous reading of 2.5% and was lower than market expectations of 2.6%.
• The core PCE index, which excludes volatile food and energy prices, rose 2.6% year over year in July from 2.6% a year earlier, below the consensus of 2.7%.
• According to the CME FedWatch tool, markets are now pricing in nearly 70% of a 25 basis point (bp) rate cut by the Fed in September, while the probability of a 50 bp cut is 30%.

Technical Analysis: Gold Price Maintains Constructive, Broader View

Gold is trading in negative territory on the day. The precious metal maintains a broader bullish context on the daily chart as the price is holding above the key 100-day exponential moving average (EMA). The 14-day relative strength index (RSI) is above the midline at 56.30, suggesting that the path of least resistance is up.

The five-month ascending channel upper boundary and all-time high of $2,530-2,540 seem to be a tough nut to crack for gold bulls. A bullish break above this level could pave the way for the psychological $2,600 level.

On the downside, the first downside target for the yellow metal comes in at $2,470, the Aug. 22 low. Sustained bearish momentum could set up an extended decline toward $2,432, the Aug. 15 low. The next contentious level to watch is $2,372, the 100-day EMA.