- Gold price is setting up for a potential short from the highs of the initial balance of the week.
- Bears eye a retest of the $2,000 market and below while under the $2,030s.
Should the correction start to decelerate within the highlighted area of potential resistance, bears could be encouraged to take on the support area between $1,970 and $1,990.
Gold price closed lower on Friday after an unexpectedly robust US Nonfarm Payrolls report whereby the United States added 253,000 new jobs in April, well ahead of the consensus estimate for a rise of 180,000.
The market now needs to consider a scenario whereby the Federal Reserve needs to back away from an expected pause in rate hikes. Consequently, bond yields were higher, bearish for gold since it offers no interest. The US two-year note was last seen paying 3.916b, up 11.1 basis points, while the yield on the 10-year note was up 6.8 basis points to 3.454%
Prior to the data, money managers started acquiring gold positions once more, as continued stress in the banking sector simultaneously forced shorts to cover ahead of the Federal Open Market Committee and raised confidence that the Fed has increasingly reached 'near terminal' rates.
´´The market has begun sniffing out a pause, which tends to drive discretionary positioning in the yellow metal higher on a lagged basis,´´ analysts at TD Securities said. ´´This points to a substantial and continued rise in gold length on the horizon, given the last pause and cutting cycle saw discretionary gold positioning rise substantially more than its current levels,´´ the analysts explained.
Gold price weekly charts
The wick on last week´s candle could be eyed as an opportunity for the week ahead to fill the wick.
Gold price daily charts
The daily chart shows a number of key areas that would need to hold if the bullish thesis is going to stick. For one, the bulls will need to stay front side of the trendline supports. $2,000 and $1,970 are key in this regard.
However, the W-formation and the strong sell-off on Friday are problematic. The bulls will need to commit to the said levels and around trendline support.
Gold, H4 chart
From a 4-hour perspective, the said support area does look vulnerable considering the current formation of the schematic that is playing out before us. Should the correction start to decelerate within the highlighted areas of potential resistance, bears could be encouraged to take on the support area between $1,970 and $1,990. Therefore, the bias is bearish while below $2,050 and nearer term, the $2,030s.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.