Gold Price Analysis: XAU/USD rallies to fresh session tops, further beyond $1,885 level
|- Gold keeps the bearish bias intact despite intermediate bounces.
- Reflation, tapering woes put a safe-haven bid under the US dollar.
- Biden, Powell add filters to the NFP-led moves, caution warranted.
Update: Gold built on its goodish intraday bounce from the $1,855 area, or over two-week lows and shot to fresh session tops in reaction to a rather unimpressive US monthly jobs data. The headline NFP print missed market expectations and showed that the US economy added 559K jobs in May. The US dollar weakened across the board, which, in turn, was seen as a key factor that benefitted dollar-denominated commodities, including gold.
Meanwhile, the softer report forced investors to scale back their expectations for an earlier than expected Fed lift-off. This, along with a sharp fall in the US Treasury bond yields, provided an additional boost to the non-yielding yellow metal. With the latest leg up, gold has now recovered a part of the previous day's heavy losses, though remains on track to end the week in the red.
This would also mark the first week of a negative close in the previous five. That said, the emergence of some dip-buying on Friday suggests that the near-term bullish trend might still be far from being over. A subsequent move back above the $1,900 round figure will reinforce the constructive outlook and allow bulls to push spot prices back to the $1,916-17 region, or near five-month tops touched earlier this week.
Previous update: Gold (XAU/USD) remains on the back foot, down 0.15% intraday around $1,870, heading into Friday’s European open. The yellow metal slumped the most since late February the previous day as the US dollar benefited from the risk-off mood. However, the pre-NFP cautious sentiment seems to tease the gold bears of late.
A triple attack day…
US dollar index (DXY), a gauge of the greenback versus six major currencies, marked the biggest daily gains in three weeks on Thursday as market participants gathered clues of Fed tapering. Although US ADP Employment Change and ISM Services PMI mostly chattered, the Federal Reserve’s (Fed) scaling back of portfolio sales, the key program used to support the economy throughout the pandemic was the hidden catalyst favoring the tapering woes.
Given the jump in fears of the Fed’s dialing back of the easy money, market players rushed to safe-havens, like the US dollar and Treasury bond, which in turn negatively affect gold prices.
It’s worth noting that the Asian session updates suggesting the US extension of the ban on Chinese companies and the arrest of a Hong Kong activist also added to the risk-off mood. However, the pre-NFP trading lull tames the market’s reaction to the news. Additionally, covid variant fears and talks over the global tax hike plans, backed by the US, also keep gold traders troubled.
Hence, stock futures and Treasury yields are directionless but the DXY remains on the front foot near the three-week top by the press time. The same keeps confusing gold traders around the key support line.
Looking forward, the US Nonfarm Payrolls (NFP) isn’t the only catalyst to watch as a speech from US President Joe Biden and Fed Chairman Jerome Powell add filters to the market’s directions, as well as gold prices. Although upbeat expectations from NFP may keep gold sellers hopeful, Biden and Powell pose risk to the further downside.
During the weekend, the first face-to-face meeting of the G7 Finance Ministers in London will be the key to watch as the EU and the UK want changes to Biden’s proposal of a tax hike on bid corporations.
Technical analysis
Gold’s corrective pullback from a two-month-old ascending support line needs to cross a 12-day-old horizontal hurdle surrounding $1,890 before the buyers could check for return.
Even so, the $1,900 threshold and the latest peak surrounding $1,917, will ask for gate passes from gold bulls.
On the contrary, the strongest bearish MACD in three months and a downward sloping Momentum line, not oversold, suggest further weakness of gold prices.
However, a clear break of $1,855, followed by the 200-day SMA level of $1,841, becomes necessary for the gold bears to keep the reins.
Hence, gold’s movement between $1,890 and $1,841 becomes less convincing of any trend.
Gold daily chart
Trend: Pullback expected
Also read...
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Gold Price Forecast: XAU/USD bears turn cautious near ascending trend-line, NFP awaited
Gold Price Analysis: XAU/USD set to decline below $1,860 as USD rebounds
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