The gold market posted its first weekly gain after five consecutive weeks of losses. Analysts say the precious metal will now take its direction from Federal Reserve Chairman Jerome Powell’s upcoming testimony and February employment report.
“There may be some weakness in the beginning, but…”
Gold bounced back to $1,850 after testing lows at $1,810. Edward Moya, senior market analyst at OANDA, comments:
I was impressed with the performance of gold, especially when I looked at the 10-year returns that were over 4%. Next week is going to be pretty crazy because of the Hawk Powell statement and US payroll data. Underneath we can see some weakness in the beginning. But it might gain some strength after payrolls.
“The pressure on the gold price may increase in the first half of the week”
On Tuesday, Powell will testify to the Senate Banking Committee on the US central bank’s semi-annual monetary policy report. That will be followed by his testimony on the same issues before the House Financial Services Committee on Wednesday. Markets will also digest the latest US nonfarm payrolls report for February, with consensus forecasts of 200,000 new positions and the unemployment rate remaining at 3.4%. Andrew Hunter, assistant US economist at Capital Economics, comments:
The February jobs report and Fed Chairman Jerome Powell’s testimony to Congress next week could give a clearer indication as to whether recent talk of interest rates ‘longer higher’ was justified.
Edward Moya thinks Powell will continue to be aggressive in his language. In this context, Moya said, “He can’t change that right now. In the first half of the week, it can reduce the weight of gold. The ‘longer time, higher interest’ message will be firmly implemented,” he says.
“Gold market continues its downward trend for now!”
A development that can move gold prices upwards may be the downward revision of the strong employment report for January. Moya said, “A significant downward revision is possible. 517,000 positions in January can be revised. We are likely to see a sharper slowdown in hiring. The February figure may also be below the consensus,” he says.
Frank Cholly, senior market strategist at RJO Futures, says gold’s strong rise at the start of the year was reversed as markets got the January jobs news. Cholly explains his views on this subject as follows:
Inflationary (CPI, PPI and retail sales) news followed the strong employment report. All these data showed that the Fed should keep raising interest rates and gold fell. The gold market remains bearish until it reaches the $1,810 level, which coincides with the yellow metal’s 200-day moving average. At this point, gold made a splash. The market can consolidate a bit here and wait for direction. But, we probably found a bottom in the $1,800-1,825 range.
“In this case, it is difficult for the gold price to go higher”
According to Frank Cholly, once gold closes above $1,860, more buying will begin. The analyst also notes that above $1,880, the $1,900 level will be back in business. In line with that, Cholly said, “It will depend on how the data unfolds over the next two weeks. The employment number will follow, followed by the CPI and PPI data for the week after that. “If we continue to see the Fed need to be aggressive about rate hikes, gold will retest last week’s lows,” he said.
Edward Moya adds that gold’s resistance is at $1,880 and support at $1,820. cryptocoin.comAs you follow from , gold continues to be very data dependent, just like the Fed, in the short term. “Last month it was all about payrolls. This time, non-farm employment, CPI and PPI will be critical for the direction of interest and precious metals. If we’re getting such good returns on fixed income, it’s hard for gold to go higher,” he comments.
Next week’s data
- Monday: US factory orders
- Tuesday: Fed Chairman Powell to testify
- Wednesday: ADP nonfarm payrolls, Fed Chairman Powell to testify, BoC rate decision
- Thursday: US jobless claims
- Friday: US nonfarm payrolls
Gold technical analysis: The market is trying to recover
Technical analyst Christopher Lewis conveys what he saw in this week’s technical picture of gold as follows. Gold markets are up a bit during the trading week as the 50-Week EMA kicks in. However, the market seems to be trying to recover as the 50% Fibonacci level is just below it. Also, the market will likely continue to see a lot of noisy behavior. However, it looks like if we can get above the candlestick top, we can start thinking about going long term. At this point, the market is likely to look towards the $1,900 level, which is a large, round, psychologically important figure and an area where we have created multiple inverted candlesticks on the daily chart.
A break below the 50-Week EMA opens the possibility of a drop to the $1,800 level. The $1,800 level is a big, round, psychologically significant number, so many people will look at it as potential support. If we go down there then things could get pretty ugly for the gold market. In this scenario, I think we have sold and are starting to reach the bottom of the overall consolidation area.
However, I think this is a situation where we will continue to see a lot of volatility and you should pay close attention to the US dollar as well as interest rates. You can see that the market continues to be volatile, but after a meter high, we got an almost 50% Fibonacci retracement. If we rally after that, the next target could be the $2,000 level.
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