The Gold spot price (XAUUSD) has recently made headlines by soaring to an all-time high, nearly breaching the significant milestone of $2300 per ounce.
With a remarkable 10% increase year-to-date, gold has captivated the attention of investors worldwide. This surge in price is largely attributed to mounting expectations of a U.S. rate cut, with markets currently pricing in a substantial 60% chance of a cut in June. Gold, being a non-yielding asset, tends to thrive in environments where interest rates are lowered, making it an attractive hedge against economic uncertainty.
As anticipation builds around the upcoming U.S. Nonfarm Payrolls data, investors eagerly await its implications on the labour market, a key determinant of inflation dynamics. This data will serve as a critical benchmark for assessing whether labour market strength could potentially hinder the prospects of a rate cut in June, further shaping the trajectory of gold prices in the coming months.
Technical
The gold spot price has been displaying a compelling uptrend, firmly positioned well above its 100-day moving average and contained within an ascending channel pattern.
Recently, support emerged at the 2228.47 level following a minor dip within the overall uptrend. However, the spot price surged to fresh highs at the 2288.28 level, driven by bullish momentum. Nevertheless, overbought RSI conditions prompted a temporary halt in upside momentum, leading to a downturn.
Presently, the spot price has retraced towards the 38.20% Fibonacci Retracement level, potentially indicating an intermediate support level. If this level holds, it could pave the way for a bullish reversal and a retest of the 2288.28 resistance level. Conversely, a breakdown below the 38.20% level, especially on high volume, could signal bearish sentiment in the market. In such a scenario, attention may shift to the 50% Fibonacci Retracement level as the next potential support level.
Summary
As gold reaches record highs, traders eagerly await U.S. Nonfarm Payrolls data for insights into inflation dynamics. Technical analysis indicates key levels: $2228.47 as support, $2288.28 as resistance, and the 38.20% Fibonacci Retracement level pivotal. Market sentiment will likely shape gold’s trajectory amid rate cut expectations.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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