Following the announcement that the US and China will resume high level talks in October, traders decided to book profits in gold and pushed this precious metal to the downside. The sell-off took price action below $1,500, but selling pressure started to recede as forex traders shifted the focus to the ECB meeting this week. Global central banks have increased their gold purchases which is supporting a longer term uptrend and as the global economy continues to cool further, gold is favored to reverse back to the upside and continue its rally. Is it time to re-enter the gold rally? Subscribe to the PaxForex Daily Fundamental Analysis and earn more pips per trade.

Central banks are starting to pump more stimulus into the economy and are weakening their respective currencies. This is further providing a boost to gold and limits the downside potential. Economic data out of Asia showed a rebound in the Japanese economy as measured by the BSI Large All Industry while Australian consumer confidence contracted in August. With the US Fed expected to cut interest rates again this month, forex traders will pay close attention to the US PPI today. Will gold be able to recover to the upside off of strong support levels? Today’s fundamental analysis will take a look at the upside potential as well as the downside risk of gold.