Gold remains sidelined above $1,800 as market players await monetary policy statements from the European Central Bank (ECB) and the Bank of England (BOE) earlier on Thursday. Analysts’ gold comments and forecasts cryptocoin.com We have prepared for our readers.
General market and gold comments
Although the yellow metal fell for the first time in four days and retreated from its weekly high, gold buyers are keeping hopeful as risk appetite weakens ahead of major central bank events and the US Dollar Index (DXY) and Treasury yields support the risk-averse mood.
Market analyst Ross J Burland states that today’s central bank moves will be crucial for monitoring the near-term direction of gold prices. Additionally, US Q4 Non-Farm Productivity and Unit Labor Costs will be on the agenda of gold traders. Gold has been flat in the session so far and is holding above $1,800, showing little change over the past few sessions. However, markets are focused on the US dollar and US Treasury yields, which pulled back after a disappointment in US jobs data. The analyst makes the following assessment:
Spot gold looks solid as the dollar cut its losses to a one-week low on Wednesday. In what could be considered a bearish trend for Nonfarm Payrolls this Friday, the decline in US private employment in January due to the rise in Covid-19 infections weighed on the US dollar.
Impact of US jobs data on gold comments
In fact, the ADP report fell for the first time in a year in January as rising Covid-19 infections disrupted business operations. The data shows a 301,000 job decrease last month. That was far from the 207,000 on expected private payrolls. Additionally, December was revised lower to show that only 776,000 jobs were added to the 807,000 originally reported.
Ross J Burland notes that the data has fueled the dollar bears’ fire that has pushed the dollar down, fueled by Federal Reserve officials who this week retracted some of the central bank’s hawkish comments. According to the analyst, the nail in the coffin is the famous falcon St. Louis Fed President James Bullard also opposed a larger rate hike in March.
In New York afternoon trading on Wednesday, US futures prices were priced in with policy tightening of about 118.6 basis points this year, Reuters reported. Futures also showed that the probability of a 50 basis point increase in March fell to 12.5% from 32% at the end of last week. TD Securities analysts make the following assessment:
The weak jobs pressure we expect is unlikely to return the Fed from its absolutely hawkish tone. Instead, we expect the central bank to view the past weakness as linked to the collapse of Omicron. In this context, the data does not help inform global macro participants whether we are facing a new regime at the Fed or whether they are trying to tame inflation expectations. We expect the precious metals complex to struggle to attract capital in this context.
“As long as gold prices do not exceed $1,820, the liquidations will continue”
Investors will focus on the European Central Bank and Bank of England meetings later today for clues on the pace of monetary policy tightening in the face of rising inflation. Ross J Burland states that in case of hawkish results, the US dollar may come under more pressure and comments:
However, this is a double-edged sword for gold, given that a chorus of hawkish central banks would increase the opportunity cost of holding unyielding bullion.
On the geopolitical front, the United States will send extra troops to protect Eastern Europe from a potential spread of Russian troops near Ukraine, US officials said on Wednesday, Reuters reported. Reminding that gold is a safe-haven asset, the analyst states that it can benefit from the increasing tension in the region. Finally, TD Securities analysts point to the impact of China’s participation in the market:
Given that Chinese demand has overwhelmingly supported gold in recent weeks, a seasonal recession following the Lunar New Year may indicate the end of supportive Chinese demand, suggesting that prices are vulnerable to deeper consolidation to support our tactical short gold position. CTA trend followers will continue liquidations as long as prices do not exceed $1,820 in the session.
Gold prices technical analysis
Market analyst Ross J Burland makes the technical analysis of gold as follows. As seen on the Chart of the Week, “this could be the end and if the bears commit to additional supply, it could be the straw that breaks the camel’s back for a major continuation to break the trendline support:
On the other hand, if the US dollar continues its southern trajectory, the M neckline will once again be the last defense to rest the $1,850 wedge resistance:
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