Having displayed a pennant bullish break on Thursday, XAU/USD (gold price in terms of USD) witnessed an almost $ 30 rally on Friday and rose to the highest levels in thirteen months at 1279.84. The bullion booked heavy gains in the US last session, after the US labour market report failed to boost further Fed rate hike bets this year. Although NFP bettered expectations (242k actual vs. 195k exp.), average hourly earnings grew only 2.2% y/y in Feb, missing expectations for unchanged performance over the month at 2.5% and booked the first drop since December 2014. Gold tends to benefit in a low-interest rate environment as it is a non-interest bearing investment asset. More so, the upsurge in gold was largely on the back of technical-driven buying following the pennant formation on daily charts.
Gold prices kicked-off the week on a bearish note, embarking upon a corrective mode after the recent upsurge. Further, the US dollar also attempted a recovery from post-NFP lows and now advances 0.35% against its six major peers, which also keeps a lid on the prices. However, the prices are expected to regain poise and resume its bullish run towards 1280 levels, underpinned by risk-off moods seen in Europe amid falling stocks and oil prices. Meanwhile, amid a lack of significant macro data from the US in the day ahead, attention will be paid to the speeches by Fed’s officials Brainard and Fischer later in the NY session.
Technicals – Could swing back higher to $ 1280
Gold prices are expected to extend higher as represented by the daily charts, with the pennant breakout on daily sticks behind the latest surge. The prices managed to sustain above 1260 barrier and now extends higher in sync with the sharply higher most major DMAs. While the daily RSI at 70, continues to point higher and thus, suggest more room for upside. A break above 1270 level remains a key for a retest of previous highs of 1280 and beyond. On the flip side, a breach of today’s low at 1256.71, opens doors for further southwards move towards crucial support near 1251-1250, the confluence zone of 5-DMA and Friday’s low. Overall, the risk remains to the upside as the bullion remains supported on the back of technical buying.
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