XAU/USD looks to 100-day SMA support and Powell’s Jackson Hole speech

• Gold sellers retain control early Friday, awaiting Fed Chair Powell’s speech at the Jackson Hole Symposium.
• US Dollar holds weekly gains, led by strong US PMI data, reduced bets for a September Fed rate cut and Wall Street’s declines.
• Downside risks appear for Gold whilst below $3,350 amid a Bear Cross and bearish RSI.

Gold is looking to extend the previous decline early Friday after Thursday’s late rebound lost traction. All eyes now turn to US Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Economic Symposium.

Gold looks south ahead of Powell speech

The US Dollar (USD) is consolidating its recent recovery to two-week highs against its major currency rivals, keeping the bearish interests alive in Gold.

The Greenback continues to ride higher on diminishing odds of an interest rate cut by the Fed next month. This hawkish shift in the markets’ expectations could be attributed to a recent slew of strong US economic data, including housing and business activity.

US Existing Home Sales for July rose to 4.01M vs. 3.92M expected, having rebounded 2.0% on the month after a 2.7% decline in June.

Meanwhile, the headline S&P Global US PMI Composite Output Index rose to an eight-month high in August, ticking up from 55.1 in July to 55.4, while the Manufacturing and Services PMIs beat estimates, with 53.3 and 55.4, respectively, in August.

Markets pared back bets for a September Fed rate cut to 75% post-US PMI data, according to the CME Group’s FedWatch Tool, from about 85% seen pre-release.

Additionally, the ongoing sell-off on US indices, due to increased concerns over the future of Artificial Intelligence (AI) investments, sags investors’ confidence, boosting the USD’s safe-haven appeal.

Furthermore, markets are expecting Fed Chair Jerome Powell to stick to the cautious stance on further easing during his opening remarks at the Jackson Hole Symposium, scheduled later in the day.

Nick Timiraos of the Wall Street Journal (WSJ), the Fed whisperer, said on Thursday that Powell could “reverse two major 2020-era policy changes; flexible inflation averaging and a bias toward low unemployment.”

Powell’s words will likely have a significant impact on the Fed rate cut expectations, eventually influencing the USD’s performance, while injecting intense volatility around the non-yielding bright metal.

If Powell pushes back against bets of aggressive rate cuts, it could provide extra legs to the USD upswing, drowning Gold back under the $3,300 level. On the other hand, the Greenback could witness a fresh sell-off on a surprise dovish shift by the Fed Chair, which could lift Gold northward.  

Gold price technical analysis: Daily chart

The daily chart indicates that risks remain to the downside for Gold, as the 14-day Relative Strength Index (RSI) grinds lower below the 50 level.

The Bear Cross also keeps the negative outlook in place. Note that the 21-day Simple Moving Average (SMA) closed below the 50-day SMA on Tuesday, validating the bearish crossover.  

Sellers need to find a strong foothold below the 100-day SMA at $3,314 for a sustained downtrend.

Further south, the July 31 low of $3,274, below which the July 30 low of $3,268 will be tested en route to the $3,250 psychological barrier.

On the flip side, Gold buyers need to take out the strong resistance near $3,350, the confluence zone of the 21-day SMA and the 50-day SMA, to negate any near-term bearish bias.

The next bullish targets are seen at the previous week’s high of $3,375 and the $3,400 round level.