- Gold now depends on what the market intends to do with the dollar post gradual Fed.
- Gold catching a bid from key downside levels and YTD lows.
Gold has bounced on the day so far, catching a bid from the 200-D SMA while the dollar heat has been turned down a touch and US yields pull back further from the 3.00% psychological level.
In an environment where gold has struggled in Q1 with global demand for gold down to the lowest in a decade, bulls are robust above the 200-D SMA at $1,304.54/oz and the recent lows of $1,301.68/oz have so far held. Gold was steady on the economic releases in the US today and then firmed despite the beats in the ISM non-manufacturing PMI and trade balance.
June gold climbed by $10, or 0.8%, to $1,315.60/oz while spot made a high of $1,318.06. The sentiment is that the Fed is in no hurry to jack up rates and will even allow inflation to move above target considering how long it has been running below it and just three hikes this year instead of four dented the dollar and in turn supports the precious metal. The US benchmark has also been a stronger signal of late, currently trading between 2.93%-2.98% today where there has been a higher correlation to the dollar's performance (and gold). Eyes will now turn to the nonfarm payrolls on Friday.
All eyes turn to nonfarm payrolls Friday
We had a glimpse of what might be in store of the ADP employment report is to be considered as any kind of a prelude. The report showed a private sector employment increase of 204k in April. The previous two months were revised lower modestly. "This report appears consistent with the continued underlying strength in the labour market and an economy that continues to grow above trend. In particular, the data do not suggest any material weakening of momentum despite modest declines in manufacturing survey indices in April," analysts at Nomura explained.
Gold bulls could find themselves in a bull trap here if the dollar turns bid and Gold drops below the 200-D SMA and YTD lows. To the downside, 1300 is a psychological barrier and below there, 1295 is a previous double top area. Breaking down these doors would be highly bearish. However, RSI was diverging from the recent downtrend and has turned higher away from oversold territory. The bid on the 4hr sticks has run its course and RSI turns south as the price meets supply at the descending 50-4hr SMA at 1317.
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.