Gold Spots (XAUUSD) clawed back some ground on Thursday, hovering above $2,040 after a four-day slide. The yellow metal’s recent woes stemmed from a rebounding dollar and rising Treasury yields, fuelled by diminished expectations of aggressive U.S. rate cuts this year.
Concerns over U.S. Federal Reserve monetary policy and conflicting economic data drove recent price swings. The Fed’s ambiguous stance on interest rates triggered market uncertainty, with expectations shifting from a 90% chance of a March rate cut to 72%. The dollar’s recent weakening has buoyed gold’s appeal, but waning expectations of early rate cuts are suppressing prices. The upcoming jobless claims and non-farm payrolls reports will offer insights into the Fed’s room for rate adjustments.
Technical
The 4-hour chart reveals a technical battleground. Price action currently sits below its key moving averages – the 20-SMA (green line) and 50-SMA (blue line) – while remaining precariously above the critical 100-SMA (orange line).
The recent breakdown of the 20-SMA below the 50-SMA suggests potential bearish pressure. However, the relatively flat RSI and long-term downtrend suggest a fragile equilibrium, with the possibility of sudden shifts in either direction.
Short-term opportunities might arise towards the initial resistance at $2,061.63/ounce if bulls push beyond the zone, potentially targeting $2,078.83/ounce. However, with the price action within a significant zone, there is potential for a short-term push to lower levels. Therefore, short-term trading opportunities could exist towards the support level at the $2,030.51/ounce price level should the bears sustain a push lower. A break below the initial support could confirm the bearish momentum, likely bringing the $2,015.33/ounce support level into play.
Summary
Gold’s outlook remains uncertain amid shifting Fed rate cut expectations and varying economic signals. The upcoming jobless claims and non-farm payrolls data will be closely scrutinized for clues about the labour market and potential rate adjustments.
The 100-SMA and upcoming data releases will be key battlegrounds in this tug-of-war. While short-term opportunities exist in both directions, a clear trend might not emerge until the market digests the coming data and risk landscape.
Sources: TradingView, Trading Economics, Federal Reserve, MarketWatch, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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