Gold eases as US Dollar trims loses ahead of key US economic data


 

  • Gold is pulling moderately lower, with the US Dollar favoured by the risk-off sentiment. 
  • The precious metal loses footing as the market focuses on US data for more cues into the Fed's future rate-hike path. 
  • Speculation that the Fed will start to cut rates in March keeps Gold near record highs.

Gold prices (XAU/USD) are ticking lower during the European morning session on Tuesday. Bullion’s mild recovery attempt from the $2,020 area has been contained at $2,040, with US Dollar regaining lost ground, favoured by a risk-averse market sentiment.

Investors have adopted a cautious stance, awaiting the release of key US macroeconomic data this week, with a special interest on Friday’s Nonfarm Payrolls report. These figures will be observed with interest to confirm the end of the Federal Reserve (Fed) tightening cycle and increased expectations of rate cuts in the first quarter of 2024.

Monday’s data showed that US Factory Orders contracted beyond expectations in October, adding to evidence that the economic growth in the US is losing pace in the last quarter of the year.

Investors’  focus on Tuesday will be on the US ISM Services PMI and the JOLTS Job Openings data. Wednesday’s ADP Employment Change and Friday’s Nonfarm Payrolls (NFP) are the highlights of the week, as they will show the strength of the labour market and determine the Fed’s near-term path.

Daily Digest Market Movers: Soft US data, hopes of Fed rate cuts support Gold

Markets are in a risk-off mood on Tuesday, which is supporting the Dollar and weighing on precious metals. Investors are reluctant to place risky bets, awaiting the release of US employment data.
  
Gold remains steady above the psychological $2,000 level, supported by soft US macroeconomic data, which feeds hopes that the Fed might start cutting rates in early 2024.

Eurozone and UK services PMI data have shown that the sector’s activity increased by more than previously estimated. This has eased concerns about a sharp economic slowdown in the coming months.

The CME Group FedWatch tool shows a 54% chance that the US central bank will trim its benchmark rate by 25 basis points in March.

US Factory Orders dropped by 3.6% in October, well beyond the 2.6% drop expected, following a 2.3% increase in September.

In China, the Caixin Services PMI accelerated to 51.5 in November from 50.4 in October, beating market expectations, yet still well below pre-pandemic levels.

The Israel-Hamas war and fears of a new epidemic in China are offsetting optimism about the upbeat Caixin Services PMI data, which shows that business activity accelerated in November.

The US ISM Services PMI, which will be released at 15:00 GMT, is expected to tick higher to 52 in November from 51.8 in the previous month. Any upside or downside surprise in the index could provide some short-term trading opportunities.

US JOLTS Job Openings are expected to have declined to 9.3 million in October from 9.55 million in the previous month, laying the ground for Wednesday’s ADP report and Friday’s all-important NFP report.

 

Technical Analysis: Gold prices face resistance above $2,040

 

The technical picture shows Gold price consolidating within the $2,020-$2,040 area after Monday’s sharp reversal from all-time highs around $2,150.

The precious metal has breached the 50% retracement of the November 13 - December 5 bull run, and the previous higher low at the mentioned $2,040, which is acting as a resistance.

XAU/USD 4-hour Chart

 

Price action has moved below the 4-hour 50 Simple Moving Average (SMA) and the Relative Strength Index (RSI) has entered into negative territory, suggesting that further correction might be on the cards.

From a wider perspective, however, the uptrend from early October lows at $1,811 remains in place, yet with bullish momentum losing strength.

XAU/USD Daily Chart

Gold Daily Chart

In the current risk-off context, with US Dollar regaining some ground,  a further decline can be expected.Bulls aim for the $2,015-$2,005 support area, where the trendline support from October 6 lows meet the 61.8% retracement of the mentioned bull run and a previous key resistance level.

Below here, the bullish trend would be canceled, and support at $1,987 would be exposed.

On the upside, a positive reaction above $2,050 would shift the bull's focus towards $2,094 ahead of the record high at $2,150.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.66% 0.73% 0.64% 1.82% 0.46% 1.20% 0.70%
EUR -0.68%   0.05% -0.03% 1.17% -0.23% 0.55% 0.04%
GBP -0.75% -0.05%   -0.08% 1.12% -0.26% 0.48% -0.02%
CAD -0.65% 0.03% 0.08%   1.20% -0.20% 0.57% 0.07%
AUD -1.85% -1.18% -1.13% -1.22%   -1.42% -0.64% -1.14%
JPY -0.51% 0.23% 0.43% 0.23% 1.39%   0.76% 0.25%
NZD -1.20% -0.53% -0.47% -0.56% 0.64% -0.74%   -0.49%
CHF -0.72% -0.04% 0.01% -0.06% 1.13% -0.24% 0.50%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

 

 

Economic Indicator

United States JOLTS Job Openings

JOLTS Job Openings is a survey done by the US Bureau of Labor Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month.

Read more.

Next release: 12/05/2023 15:00:00 GMT

Frequency: Monthly

Source: US Bureau of Labor Statistics

Economic Indicator

United States ISM Services PMI

The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector, which makes up most of the economy. The indicator is obtained from a survey of supply executives across the US based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that services sector activity is generally declining, which is seen as bearish for USD.

Read more.

Next release: 12/05/2023 15:00:00 GMT

Frequency: Monthly

Source: Institute for Supply Management

Why it matters to traders

The Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) reveals the current conditions in the US service sector, which has historically been a large GDP contributor. A print above 50 shows expansion in the service sector’s economic activity. Stronger-than-expected readings usually help the USD gather strength against its rivals. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are also watched closely by investors as they provide useful insights regarding the state of the labour market and inflation.

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