Gold price prediction ahead of the Fed’s Jackson Hole meeting

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Aug 24, 2021
  • Gold price is trading steadily above $1,800 amid the weakening US dollar.
  • According to Commerzbank, the fundamentals do not support further appreciation of the US dollar.
  • Investors are keen on the annual Jackson Hole meeting for cues on tapering asset purchases.

Gold price is trading steadily above $1,800 as the US dollar’s rally eases. According to Commerzbank, the greenback does not have much room for further appreciation. Such a setup will likely be a bullish catalyst for the precious metal.

gold price
gold price

Greenback’s easing

A key driver that has boosted gold price back to above the crucial level of $1,800 is the easing of the US dollar. The dollar index, which tracks the value of the greenback against a basket of currencies, rose to its highest level year-to-date at $93.73 on Friday.

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The surge resulted from the currency’s heightened safe-haven appeal. This is as the Delta variant continues to spread aggressively in different parts of the world. Since then, the dollar index has plunged to its current level of 93.02. The US dollar usually has an inverse correlation with gold price. As such, a decline in the value of the greenback is a bullish catalyst for the precious metal.

During an interview on Bloomberg, Commerzbank’s Esther Reichelt indicated that the US dollar is moving towards a period of overvaluation. She further stated, “we do not see much further room for the dollar appreciation, at least not fundamentally justified.”

Investors are now keen on the Fed’s Jackson Hole meeting scheduled for Thursday. During the annual central bankers’ gathering, the Fed Chair is expected to share details on tapering the asset purchases. Precious metals will also be reacting to the US GDP preliminary data and PCE price index numbers expected on Thursday and Friday respectively.   

Gold price technical outlook

XAU/USD is trading steadily above the crucial resistance-turn-support level of 1,800 for the second consecutive session. At the time of writing, the precious metal was up by 0.18% at 1,808.78. In the previous week, it was trading sideways around the support zone of 1,780 as the taper talks weighed on the precious metal.

As the US dollar’s rally eases in the new week, gold price has rebounded to above 1,800, which has been a crucial support level since early July. On a four-hour chart, it is above the 25 and 50-day exponential moving averages.

In the near term, I expect the price to trade within a tight range of between the psychological level of 1,800 and prior resistance level of 1,815. A decline below the horizontal channel’s lower border may place the support level to 1,793.10 – along the 25-day EMA. However, if that happens, it will likely rebound to the 1,800 support zone.

gold price
gold price
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