Gold Under Selling Pressure and Struggling to Regain Its Luster Quickly .. Will It Succeed?

- Spot gold remains under selling pressure at the start of the trading week, falling below the psychological level of $2,500.? The mixed U.S. jobs report released on Friday reduced the likelihood of a larger 50-basis-point interest rate cut by the Federal Reserve.? This leads to a slight recovery in U.S. Treasury yields, which helps the U.S. dollar strengthen its recovery from its lowest level in over a week, becoming a key factor in driving flows away from the unprofitable yellow metal.

- The U.S. Bureau of Labor Statistics reported last week that nonfarm payrolls increased by 142,000 in August compared to the expected 160,000 and the previous month's revised reading of 89,000.

- Other details from the report showed that the unemployment rate fell to 4.2% from 4.3% in July, and wage inflation, as measured by the change in average hourly earnings, rose to 3.8% from the previous 3.6%.

?- According to the CME Group's FedWatch Tool, markets are pricing in about a 70% probability of a 25-basis-point rate cut by the Federal Reserve later this month, with a 30% chance of a 50-basis-point cut.

?- The U.S. dollar, which initially declined after the jobs data was released, quickly regained momentum and traded slightly higher posing an obstacle to the price of gold.

- The mixed U.S. jobs data provided clear evidence of a sharp deterioration in the labor market and weighed on investor sentiment amid ongoing geopolitical tensions, which should support gold as a safe haven.

- The nonfarm payrolls report raises concerns about a slowdown in the world's largest economy, which could support the price of gold. Furthermore, the lack of progress in ceasefire negotiations in the Middle East reduces investors' appetite for risk, which should contribute to limiting the downward trend of the safe-haven precious metal. This makes it wise to wait for a strong sell-off and follow-up before taking a position for the continuation of the decline that began on Friday from near the historical peak.

- Markets did not react much to the latest Chinese inflation figures, which showed that consumer prices rose for the seventh consecutive month in August, while producer prices continued to contract. Data published by the People's Bank of China showed that the country's gold reserves stood at 72.8 million fine ounces at the end of August, unchanged for the fourth consecutive month.

Gold Technical Analysis

- Technically, gold needs to break below the $2,470 support level for sellers to take control of the general trend. The price of gold has been oscillating in a familiar range over the past 3 weeks. The levels of $2,465 and $2,450 may be good long levels, provided the daily close is below $2,480. A strong break below $2,440 may push gold down to levels around $2,420 per ounce. The downward trend could extend further towards the psychological support level of $2,400.

- On the other hand, if gold manages to break the $2,520 resistance level, it could test the historical peak (ATH) near $2,531.69, and if breached, the yellow metal could target levels of $2,560 and $2,600 an ounce.

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