XAU/USD (gold price in terms of USD) extended its bullish run for the second straight session on Thursday, climbing as high as $ 1157.40, the highest levels since Oct 29 2015. The prices retreat to 1155.45 levels at close, although gave a daily closing above the weekly 50-SMA for the first time in a year. As expected, the bullion rallied almost $ 18 intraday after the US dollar resumed its sell-off across the board and added to Wednesday’s losses. The US dollar, gauged by the US dollar index fell to fresh four-month lows of 96.27. The recent extensive sell-off in the greenback was triggered by Fed’s Dudley’s comments delivered on Wednesday, while the recent streak of poor US fundamentals also poured cold water on four Fed rate hike expectations. Fed’s Dudley noted, there was a need to consider tighter financial conditions and the weakening global outlook in framing US monetary policy.
As for today’s trade so far, the yellow metal keeps its upbeat momentum intact heading into the highly influential US NFP report , which is likely to have a strong bearing on the Fed’s further rate hike prospects. The prices are seen consolidating the upside and hovers around $ 1154, with markets awaiting the US data for the next push higher. Markets are expecting the NFP report to show around 189,000 news jobs created last month in the US economy, sharply lower from 292,000 jobs added in December. A weak print is expected to bolster the gold bulls and lead to the extension of the recent gold rally. The chance of a March Fed hike will almost be squashed if the data disappoints and adds to the deteriorating US economic prospects. Non-interest bearing gold tends to benefit in a low-interest rate environment.
Technicals – Gold could test $ 1180 on poor NFP report
On the daily charts, the prices have failed to take out Fib 78.60% resistance at 1160.19 (retracement of Oct 15 – Dec 3 slide) on yet another occasion today and now drifts slightly lower on the back of a minor correction after the recent strength. Should the key NFP report come in weaker than expectations, we could see renewed strength around the bullion and would climb back higher for a test of Fib 78.60% level, beyond which doors open up towards $ 1180-83 Oct 2015 levels. On the flip side, if the data beats estimates and turns out to be net USD positive, the bullion could drop to the upward sloping hourly 50-SMA support placed at 1145.04, below which 5-DMA at 1141.57 would be tested. In case the data surprises to the upside and comes outstandingly upbeat, then March Fed hike bets would be back on the table, drowning gold to the crucial Fib 61.80% of the same decline placed at $ 1135.59 (personally doesn’t seem likely for now).
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