- Gold holds the higher ground amid recent weakness in Treasury yields, DXY.
- XAU/USD’s daily chart shows a range breakout is likely on the US NFP release.
- Gold Weekly Forecast: Gold price fails to clear the $1,800 hurdle ahead of key US data.
Update: Gold price reverses the pullback from intraday high while picking up the bids to $1,790, up 0.15% intraday, ahead of Thursday’s European session. In doing so, the price of gold rises for the second consecutive day as US Treasury yields and the USD are yet to respond to the latest challenges to the risk sentiment.
Among them, Beijing's dumping of the China-Australia strategic economic dialogue mechanism and pressure on the Japanese government to extend the third state of emergency beyond the May 11 deadline are the key factors that recently weigh on market sentiment. Also, India’s fresh record infections above 400K roil the mood and should have challenged gold buyers. Even so, the stock futures are mildly offered ahead of an important day with full markets and crucial events in the UK as well as Eurozone.
Given the gold trader’s rejection of the risk-off mood, buyers are hopeful to attack the $1,800 threshold one more time.
Gold is extending its range play within a $50 band below $1800 into the fifteenth straight session on Thursday, set to end this week with moderate gains. The bulls are eagerly awaiting the US NFP report for a fresh direction.
The price of gold looks to build onto Wednesday’s rebound, as the US Treasury yields remain subdued amid dovish Fed expectations. Markets seem to have shrugged off Treasury Secretary Janet Yellen’s comments on inflation and a likely rate hike, as they believe that the Fed is unlikely to embark upon the tightening or tapering path anytime soon.
The Fed continues to maintain that they are still distant from achieving their employment goal, with about 8 million Americans still out of job since the pre-pandemic levels.
Yellen said Tuesday, ‘it may be that interest rates will have to rise somewhat to make sure our economy doesn't overheat.” Her comments spooked markets that led to a global sell-off, lifting the haven demand for the dollar at gold’s expense.
However, later she walked back on her words, which did help to calm markets and cap the gains in the greenback. Gold, thus, attempted a bounce towards $1800 but failed once again near the previous week high of $1790.
Gold prices continue to find support from the recent surge in the precious metals complex, especially with the price of Palladium sitting at record highs above the $3,000 mark. Silver retreated from two-month highs but the undertone continued to remain bullish amid expectations of a faster global economic recovery, which would boost the industrial demand for silver and palladium.
NFP: Key event risk ahead
After the US private sector employment rose only by 742K as against expectations of +800K in April, markets turn cautious ahead of the official NFP print. The ADP release is usually seen as a precursor to the US payrolls data. The US economy is likely to have added 978K last month vs. 916K seen previously.
An NFP disappointment could raise doubts on the strength of the US economic recovery, which could push back the Fed’s tapering expectations, rendering gold-supportive. However, the US dollar could see some resurgent haven demand if the broader market sentiment deteriorates on downbeat figures, which could limit gold’s upside attempts.
Gold: Technical outlook
As observed on gold’s daily chart, the price has been wavering in a familiar range below $1800 since April 16, lacking conviction on either side, as traders seemingly await a strong catalyst for the next directional move.
Gold Price Chart: Daily
The range is getting tighter each passing day, with the 100-daily moving average (DMA), now at $1798 continuing to test the bullish commitments.
Meanwhile, the mildly bullish 21-DMA at $1771 keeps protecting the downside.
The Relative Strength Index (RSI) remains flattish while trending above the central line, highlighting that the bullish potential still remains intact.
A daily closing above the 100-DMA barrier is needed to confirm an upside break from the range, which could bring the $1800 mark back into the picture.
Recapturing the latter is critical for the gold bulls to ride higher towards the February 24 high of $1813.
To the downside, if the 21-DMA support is taken out on a sustained basis, a drop towards the 50-DMA at $1744 cannot be ruled out.
All in all, gold’s fate hinges on the US NFP release. In the meantime, the dynamics in the yields and the dollar will continue to influence the prices.
Gold Futures: Still room for extra gains
Open interest in Gold futures markets reversed the previous day drop and increased by nearly 1.1K contracts on Wednesday in light of preliminary figures from CME Group. On the opposite direction, volume shrunk by nearly 58.5K contracts after two consecutive daily builds.
Gold remains capped by $1,800
Gold prices edged higher on Wednesday and gradually approaches the key $1,800 level. The move was sustained by rising open interest, indicative that the continuation of the uptrend remains in place in the very near-term. That said, the $1,800 mark per ounce troy stays as the next key barrier for gold-bulls.
Will gold break back above $1800 before silver breaks $27? [Video]
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