Gold prices started the last week with a rise and continued to rise on hopes of improving the demand outlook. Despite rising US Treasury bond yields, the yellow metal climbed above $1,840 on Friday, ending a four-week streak of losses. The two-day statement from FOMC Chairman Jerome Powell and the upcoming February jobs report from the US will guide the precious metal’s move next week.
Markets will closely monitor Powell’s statement
cryptocoin.com As we reported, FOMC Chairman Jerome Powell will testify before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday on the Federal Reserve’s semi-annual monetary policy report. In the past, Powell has made the same prepared statements in both games. Therefore, markets will closely follow Tuesday’s statement. Powell will certainly be asked about the possibility of the US economy going into recession as a result of inflation and policy tightening by the US central bank. Market analyst Eren Şengezer interprets the impact of the answer to this question as follows:
The USD could come under selling pressure if Powell reports that a return to larger, 50bps rate hikes is unlikely in the near future. So it can open the door for further increase in gold. According to the CME Group FedWatch Tool, markets are pricing in a 50 basis point rate increase with a probability of about 30% at the next meeting. If investors are convinced that the next rate hike will be 25 basis points, it shows bearish room for US T-bond yields and the USD.
“This development could be helpful for gold prices”
Powell, on the other hand, may avoid committing to the size of the next rate hike and reiterate the data-driven approach. In this scenario, market action is likely to remain volatile ahead of the February jobs report on Friday, according to the analyst. In Powell’s statement, his comments on the decline in inflation and the growth outlook will also be important. Investors will also take into account Wall Street’s reaction. A risk rally following this event could hurt the USD and boost gold. US Non-Farm Payrolls (NFP) are forecast to fall by 35,000 in February after an impressive 517,000 increase in January. The analyst assesses the impact of the data as follows:
The USD could strengthen on Friday if the NFP surprises once again above 100,000, especially if Powell sticks to the data-driven approach as described above. On the other hand, a negative data could trigger a USD selling wave with an immediate reaction and help the gold price rise.
Other data to watch and its implications
Market participants will also examine the key details of the labor market report. On an annual basis, wage inflation, as measured by Average Hourly Earnings, is forecast to rise to 4.5% from 4.4% in January. The Fed worries that rising wages will feed higher inflation expectations and make it harder for them to lower price pressures. Therefore, a drop in this component could put pressure on the USD and vice versa.
Finally, the Labor Force Participation Rate is projected to decline from 62.4% to 62.3%. If there is a significant improvement in this data, it could mean that employers won’t have to offer higher salaries to potential employees with more people looking for jobs. On the other hand, this can be considered as a negative development for the USD.
Gold prices technical view and forecast survey
Market analyst Eren Şengezer draws attention to the following levels in the technical outlook of gold. Gold prices climbed above $1,830, where the Fibonacci 38.2% retracement level of the last uptrend was located and managed to hold there. Once gold stabilizes above $1,840 (20-day Simple Moving Average), it could target $1,865 (50-day SMA) and $1,880 (Fibonacci 23.6% retracement).
On the other hand, sellers may take action if gold closes below $1,830. In this scenario, $1,810 (static level), $1,800 (psychological level, 100-day SMA) and $1,790 (Fibonacci 50% retracement) are aligned as intermediate support ahead. Meanwhile, the Relative Strength Index (RSI) indicator on the daily chart is about to climb above 50, suggesting that the sellers are staying on the sidelines for now.
The FXStreet Forecast Survey paints a mixed picture for gold prices in the near term. The one-week average target in the survey is seen as $1,845. Meanwhile, the uptrend remained intact in the one-month outlook.
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