Gold prices started Monday lower on a stronger dollar, but then turned north. Investors and traders will focus on US NFP data and fed speakers. In addition, the markets will closely follow the events in China. Analysts interpret the market and share their forecasts.
Dollar gains eclipse gold’s safe-haven status
Spot gold was trading at $1,754.6, up 0.10% at the time of writing. US gold futures remained flat at $1,754.3. Meanwhile, the dollar index (DXY) fell 0.5%. Thus, it made the dollar-priced bullion cheaper for buyers holding other currencies. Yeap Jun Rong, IG market strategist, comments:
Gold prices closely follow the movements of the US dollar. Also, uncertainty stemming from rising unrest in China seems to support the dollar this morning. Considering the Covid situation in China, people are probably shifting to defense assets. However, the dollar’s gains currently eclipse gold’s safe-haven status.
“It is possible for the gold price to see $1,727.50 again”
On investor radar is Fed Chairman Jerome Powell’s speech on the US economy and labor market on Wednesday that will provide clues to the monetary policy outlook. cryptocoin.comAs you follow, the minutes of the last policy meeting pointed out that interest rate hikes will slow down. After that, most market participants are pricing in a 50 bps increase at the Fed’s December meeting.
The ADP National Employment report and the US Department of Labor’s non-farm payroll data to be released this week will also be in the focus of the market for their possible impact on the Fed’s rate hike strategy. Spot gold is likely to revisit the November 23 low of $1,727.50, according to Reuters technical analyst Wang Tao.
Unrest in China hampers gold price recovery
Chinese authorities have stepped up anti-Covid lockdown measures to reduce infections. The intense protests of individuals against this reduced the risk appetite theme. This led to a sheer decline in risk-sensitive currencies. However, it supported the US dollar. Market analyst Sagar Dua states that the decline in the price of gold is quite low compared to assets that are perceived as bearish risk. The analyst highlights the following:
The catalysts that have greatly affected the price of gold are the recovery in the US dollar and anxiety before the speech by Federal Reserve chief Jerome Powell.
Jerome Powell’s uncertainty mitigation speech
Conversations about the slowdown in the Federal Reserve’s current rate of rate hikes peaked. Regardless of the Fed’s December monetary policy decision on interest rates, risk-sensitive assets enjoyed a ball. Last week, Federal Open Market Committee (FOMC) minutes clarified that Fed policymakers are in favor of slowing the rate of interest rate hikes in order to monitor the work yet to be done to reduce financial borrowing and slow inflation.
Fed Chairman Jerome Powell’s speech will give market participants clues as to whether the Fed will continue its 75-bps rate hike spell or move on to a lower rate hike. According to the analyst, a softer tone used for interest rate guidance will strengthen the gold price going forward.
“US ADP data is crucial trigger ahead of US NFP”
This week, the US Non-Farm Payrolls (NFP) data will be of great importance. The size of the change in the employment level in the US in November will have a critical impact on the Fed’s interest rate decision. But before that, investors will follow US Automated Data Processing (ADP) Employment data. According to estimates, the US economy added 200,000 new jobs to the labor market. This is below the previous 239 thousand data.
The Federal Reserve is constantly tightening its monetary policy. This causes economic projections to weaken. Firms postponed their expansion plans due to high interest obligations. This forced them to delay their manpower demands.
Gold price technical view
Market analyst Sagar Dua draws attention to the following levels in the technical outlook of gold. Gold price showed a rapid recovery after testing the 38.2% Fibonacci retracement at $1,722.00. It also crossed the 23.65 Fibo retracement at $1,746.50 on the hourly scale.
The precious metal is hovering around the 50-period Exponential Moving Average (EMA) at $1,753.17, indicating uncertainty over the short-term trend. Meanwhile, the Relative Strength Index (RSI) (14) rallied after detecting support around 40.00. This indicates that the declines have been explosively capitalized by market participants.
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