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Gold Price Recoups Post-NFP Losses amid Ongoing Tilt in USD Sentiment

The price of gold continues to track the August range as it quickly retraces the decline following the US Non-Farm Payrolls (NFP) report, and current market trends may keep the precious metal afloat as the crowding behavior in the US Dollar looks poised to persist ahead of the Federal Reserve interest rate decision on September 16.

The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish behavior also taking shape in August as precious metal tagged a new 2020 high ($2075).

The price of gold cleared the previous record high recorded in September 2011 ($1921) even though the Relative Strength Index (RSI) failed to retain the upward from June, but the indicator registered a new extreme reading (88) for 2020 as the oscillator pushed into overbought territory for the third time this year.

In turn, therecent sell-signalin the RSI could be indicative of a potential exhaustion in the bullish behavior rather than a change in trend as it recovers from its lowest reading since June, and the indicator may help to validate the wedge/triangle formation as it breaks out of the downward trend established earlier this month.

Will keep a close eye on the RSI as it appears to have bottomed out in August, but need to see the oscillator to push towards overbought territory to indicate a bullish outlook, with a push above 70 likely to be accompanied by higher gold prices like the behavior seen in July.

Until then, the price of gold may continue to consolidate as it marks another failed attempt to close below $1907 (100% expansion) to $1920 (161.8% expansion), but need a closing price above the Fibonacci overlap around $1971 (100% expansion) to $1985 (261.8% expansion) to bring the $2025 (78.6% expansion) region back on the radar.

A break/close above $2025 (78.6% expansion) opens up the record high price ($2075), with the next area of interest coming in around $2092 (161.8% expansion).

Reference by: David Song, Currency Strategist