Gold teasing corrective bounce amid the drop in equities

Gold looks due for a corrective bounce as the precious metal's 4-hour RSI has diverged in favor of the bulls.
A weaker-than-expected ADP and the drop in the employment sub-index of the ISM non-manufacturing has raised the possibility of the non-farm payrolls printing well below estimates.
A risk-off tone in the stocks markets could bode well for the safe haven metal.

Omkar Godbole FXStreet Contributor

Gold is attempting a corrective bounce in Asia, after having created a positive divergence of the RSI on the 4-hour chart yesterday.

The yellow metal is currently trading at $1,287 - up 0.10 percent on the day.

Prices hit a high of $1,290 yesterday after the US ADP report showed that non-farm private employment growth was below expectations in February at 183,000 vs 189,000 predicted. The uptick, however, was short-lived, possibly due to the upward revision of the previous month's print by 87,000.

That said, the markets may begin pricing in the possibility of a below-forecast NFP. After all, both the employment sub-index of the ISM non-manufacturing and the ADP employment report have shown fewer job additions in February

So, gold may see a stronger bounce while heading into Friday's non-farm payrolls release.

Also, the risk-off tone in equities could bode well for the yellow metal. At press time, Japan's Nikkei is reporting 0.70 percent drop. Stocks in Hong Kong and South Korea are flashing moderate losses, while the Shanghai Composite index is trading largely unchanged on the day.

Meanwhile, futures on the S&P 500 index are currently down 0.10 percent. The US stocks dropped yesterday with the Dow Jones Industrial Average falling 0.52 percent.

Gold Technical Levels

1. R3 1298.28
2. R2 1294.59
3. R1 1291.08
PP 1287.39
1. S1 1283.88
2. S2 1280.19
3. S3 1276.68

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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