XAU/USD (gold price in terms of USD) reversed nearly half of Monday’s rally and finished the day in the red on Tuesday as the risk-on rally in the global equities and upbeat US ISM manufacturing sector activity report bolstered the USD bulls. Markets started pricing-in further Fed rate rises this year after yesterday’s upbeat data added to the recent series of improved US economic fundamentals, and thus weighed on the non-interest bearing yellow metal. The ISM PMI gauge came in better than expected; booking 49.5 in February, up from 48.2 seen in January. The prices dropped sharply lower from 1248.50 – daily highs, and hit a low of 1227.16 post the US data release, before recovering some ground to 1232.17 at close. The precious metal stayed well above the 10-DMA support placed at 1225.62.
Gold prices extended losses for the second straight session on Wednesday and trades around 1228 levels, retreating from daily lows struck at 1224.73. The prices came under fresh selling pressure this session after European stocks joined the global rally as risk-on persists in full swing. Hence, markets look to take the yield advantage and prefer to hold riskier/ higher yielding assets, curbing the demand for the non-yielding/safe-haven gold. Moreover, gold is also weighed down by a broadly higher US dollar, backed by the risk-on wave as well as by the upbeat US data. The risk remains to the downside ahead of the US ADP employment report, as the risk-sentiment will continue to drive the bullion. The US private sector is expected to have created 185,000 new jobs in February, against 205,000 jobs added a month before. However, the prices could find support from weak US jobs print and could rebound higher post-data.
Technicals – Gold regains 10-DMA support at 1227.82
The daily chart looks not so convincing for gold bulls, although could provide a chance to the traders to cash in at 1240-45 levels, should the US ADP report come in weak and pour cold water on renewed Fed rate hike bets. The prices hovers above 1228-29 levels, clinging to 10-DMA placed at 1227.82. A break of the last, the prices could drop further to 1214.13, where the bullish 20-DMA stands. The bulls may find fresh bids near the last and swung back higher to resume its recent upside momentum. To the topside, the next resistance is seen at 5-DMA (1231.57), beyond which 1233-35 (hourly 50 & 100-SMA) zone will act as a strong hurdle. If the bulls succeed to take out the last, 1240-45 levels would be back in the picture.
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