Gold hits a new four-day low as US recession fears fade.

• Gold price hits four-day lows as USD strengthens.
• Wage growth in the US slows as workers become more reluctant to change jobs frequently.
• Hopes of a soft landing are boosted by the sharp rise in the US unemployment rate to 3.8%.

The price of Gold (XAU/USD) extends its downtrend while the US dollar remains firm due to bearish market sentiment and steady US job growth. The yellow metal is facing pressure that the Federal Reserve (Fed) is likely to keep interest rates higher for a longer period. The attractiveness for the US dollar improves significantly as the US economy is expected to avoid a recession due to easing inflation and stable labor markets.

US wage growth slowed in August as employees appear to be holding on to their current jobs due to declining confidence in the labor market. After last week’s data pointed to steady job growth, slower wage growth and broadly flat factory activity, investors turned their attention to the ISM Services PMI for August, due on Wednesday. The PMI is expected to hold steady at 52.6 as demand for services continues to hold up.

Daily Summary of Market Movements: Gold Price Falls as Yields Recover

• Gold price corrects below the five-day consolidation formed in a range between $1,939 and $1,945, although the overall bias remains positive as investors expect the Federal Reserve to have finished raising interest rates.
• According to CME Group’s FedWatch tool, there is a 60% chance that interest rates will remain unchanged at 5.25%-5.50% by the end of the year.
• The precious metal remains sideways due to little trading over the holidays. US markets remained closed on Monday for Labor Day.
• Hopes of a soft landing from the Fed were boosted on Friday by data showing the US Unemployment Rate rose sharply to 3.8% and wage growth slowed in August, adding to signs of a cooling off in the labor market.
• The latest data suggests that US workers avoid changing jobs as often as in recent months, a sign of diminishing confidence in the labor market. Even so, wage growth is still higher for employees who change jobs than for those who stay.
• Lower wage growth, and therefore less money availability, would curb the drive for consumer spending and further alleviate inflation.
• The Dollar Index (DXY) hits three-month highs above 104.50. The Dollar appears supported by August labor market data, which remains strong, offsetting the fact that the Manufacturing PMI held below the 50.0 threshold for the 10th consecutive month.
• Despite the significant easing of bets by the Fed hawks, the dollar remains resilient as fears of a recession in the US economy have receded.
• Goldman Sachs analysts see a 15% chance the US economy will enter a recession as inflation cools and job growth remains strong. Previously, recession expectations for the US economy stood at 20%.
• Cleveland Fed President Loretta Mester said Friday that supply and demand in the labor market are balancing better, but the labor market remains strong. She further added that although job growth has slowed and job openings have decreased, the unemployment rate is low.
• The focus will be on factory orders for July. A contraction in orders of 0.1% per month is expected. In June, new orders grew 2.3%. ISM manufacturing data last week showed companies cut spending on inventory builds and focused on improving margins.
• This week, the focus will be on the ISM services PMI for August, which is due to be released on Wednesday. The PMI is expected to remain at 52.6 points.
• Investors expect the Fed to hold interest rates steady in September, but the US central bank is likely to leave the door open for further monetary policy tightening. Investors disagree on whether the Fed will discuss rate cuts.

Technical Analysis: Gold Price Skids to $1,930

Gold price updates to a four-day low after a breakout of the consolidation formed in a range of $1,939-$1,945 as the Dollar Index extends its uptrend. The precious metal falls near the 50-day EMA at $1,932.00. Still, it remains above the 20 day EMA, which indicates that the short-term trend is up.

The RSI is struggling to enter the 60.00-80.00 bullish range. If the index reaches these levels, it will trigger the bullish momentum.