XAU/USD Price Analysis: Gold Slides As US dollar Bounces From 2-Year Low

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Gold (XAU/USD) has renewed its weekly lows in the early European session on Thursday, although it lacked any significant follow-through sell-off and has recovered a bit from its fall.

The yellow metal began its retracement from the $1992 level (its 2-week high) and has continued on a depressing sentiment for the second consecutive session now. The slide was mostly due to the strong recovery in the US dollar (DXY) and the upbeat risk appetite across markets.

The greenback’s strong recovery from a two-year low was largely sponsored by the better-than-expected US ISM Manufacturing PMI report on Tuesday. Increased demand for USD tends to thwart the safe-haven appeal of the dollar-denominated commodity.

Expectations of an additional US stimulus and Thursday’s upbeat Chinese Caixin Services PMI have further bolstered investors’ risk appetite.

Additionally, the US Treasury bond yields saw a decent bounce this week which piled extra pressure on the non-yielding commodity.

Moving on, market participants will be looking at the US economic docket today—which features the ISM Non-Manufacturing PMI—for clues. This data report might produce some short-term volatility as the markets brace for tomorrow’s NFP data.

Gold (XAU) Value Forecast — September 3

XAU/USD Major Bias: Bearish

Supply Levels: $1940, $1960, and $1983

Demand Levels: $1923, $1909, and $1900

Gold failed to hold on to its previous consolidation phase yesterday and has fallen below the key $1940 resistance. A sell-off was triggered (as projected in an earlier analysis) but the precious metal found strong support at our ascending trendline. At press time, gold is still battling with this line but will likely find its footing from here and bounce back to its previous highs.

That said, a break below this trendline could precipitate further declines for gold and could drag the price to the $1900 psychological line once again.

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