As anticipated, gold prices in terms of the US dollar (XAU/USD) extended its range trade on Tuesday, although pierced through the 1146.40 hurdle to register daily highs at 1147.99 levels. However, the prices failed to hold above 1146 levels and reverted to the familiar range near 1140 levels at close. Gold prices initially surged on increasing safe-haven demand amid escalating China slowdown worries after the Chinese manufacturing gauge disappointed markets, hitting a three-year low. While falling global equities along with oil prices added to the persisting risk aversion, further boosting the yellow metal.
As for today’s trade so far, XAU/USD appears to be gathering pace for a decisive break to the upside, despite European equities bouncing back at open, as China concerns persist lending support to the gold prices. However, the gains in the precious metal are likely to remain capped as the USD index (DXY) continues to strengthen as stabilizing US and European futures boost the appetite for riskier assets. DXY, a measure of the currency's performance relative to six major peers, trade 0.33% higher on Wednesday, chipping away losses from the previous two days. Later in the day, gold prices are expected to track USD moves ahead of the crucial US ADP employment report which is expected to show a decent increase by 200,000 jobs, but markets have cautioned as the hardest-hitting data is yet to come – the US NFP due on Friday.
Technicals – Hovers around 10-DMA
XAU/USD keeps pushing higher beyond 1140 levels and now surpassed the 10-DMA resistance located at 1141.60 to trade above 1142. The pair edges higher despite the rebounding US dollar as still uncertainty surrounding China’s economic health prevails. While markets await the upcoming US data releases for further direction. The pair has found good support at 5-DMA placed near 1135.50 levels. The daily RSI around 57 aims higher supporting potential upmoves in the day ahead.
Should the US ADP data meet expectations or outpace estimates, the US dollar could further extends its recovery mode towards 96.50 levels, dragging XAU/USD to the 5-DMA support below which the price could test the downward sloping 50-DMA located at 1130 levels. On the contrary, if the US data misses forecasts, we could see a sharp rally in gold prices towards 1155 (intermittent highs) levels. A break above the last, the pair could climb further for a retest of 100-DMA placed at 1161.40.
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