XAU/USD (gold price in terms of USD) printed fresh four-month highs last Friday at $ 1174.54 and booked third weekly gain in a row. Gold prices dipped sharply to 1144.90 lows after the US labour markets report came in well above expectations. Although the headlines figures missed estimates and dropped 151k in Jan, the US jobless rate fell to 4.9% in January, marking the lowest level since February 2008. While the average hourly earnings rose 0.5% in January, notably steeper than the 0.3% increase forecasted. However, the bullion quickly regained lost momentum and rebounded higher to the highest levels since Oct as the latest upbeat data failed to bring March Fed rate hike back on the table. The likelihood of a rise in the rates at this next meeting is assessed at just 14% by the futures market according to the CME Group 30-Day Fed Fund futures prices.
As for today’s trade so far, the yellow metal retreated sharply from multi-month highs and is seen consolidating the upside near $ 1165 over the last few hours. The prices gave up nearly $ 10 post-NFP highs as markets continue to assess the US jobs report and its implications on the Fed’s interest rates outlook. While persisting risk-on trades across the financial markets on the back of a minor recovery seen in oil prices, also diminishes the safe-haven bids for gold. Looking ahead, amid holiday-thinned trades today and a sparse US macro calendar, the bullion could look for an excuse to correct three consecutive sessions of gains seen last week.
Technicals – Reversal due after 3 white soldiers on daily sticks?
With three back-to-back sessions of gains last, the prices have formed three white soldiers candle stick pattern on the daily charts and hence, points towards a sign of the change in investor sentiment. The prices could fall further and extend the corrective slide to Fib 78.60% resistance at 1160.19 (retracement of Oct 15 – Dec 3 slide). Fresh bids are likely to emerge at the last, as the bullish potential remains intact. Hence, gold could climb back towards $ 1175-1180 Oct 2015 levels. Overall, the upside looks more appealing as markets have dramatically scaled back their bets of Fed rate rises amid a weaker-than-expected chunk of US macro that suggested that the world's number one economy has indeed lost steam.
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