The gold spot price (XAUUSD) experienced a dip below the significant $2,000 per ounce threshold on Monday, influenced by a stronger US dollar as the market awaited Tuesday’s release of CPI data. Notably, Friday’s US NFP data revealed a robust labour market, surpassing expectations with 199K jobs added, exceeding the 180K consensus. Concurrently, the unemployment rate declined from 3.9% to 3.7%. This positive employment report led to a recalibration of expectations for future rate cuts, causing the probability of two cuts by May to drop from 36% a week ago to 23%, according to the CME FedWatch Tool. This shift favoured the dollar, impacting the performance of gold unfavourably.
Looking ahead, the upcoming week holds pivotal events. First on the agenda is the release of US inflation data on Tuesday, followed by the Federal Reserve’s final interest rate decision of the year. This sets the stage for an intriguing week in the commodities market, with gold poised for potential shifts in response to these key economic indicators.
Technical
On the 4H chart, an ascending channel suffered a breakdown last week, with the price currently looking for support at the 61.8% Fibonacci golden ratio of $1,991.98/ounce. The 25-SMA (green line) has fallen below the 50-SMA (blue line), suggesting a shift in the market’s shorter-term momentum.
If the support at $1,991.98 holds, a pivot could send the price back above the $2,000/ounce level, with the Fibonacci midpoint potentially offering resistance at $2,010.55/ounce. The 100-SMA (orange line) could present a further hurdle to the upside with resistance at $2,015.89/ounce before a retest of the breakdown level could occur close to the 50-SMA at $2,032.49/ounce.
However, if the support at $1,991.98 fails to hold, the breakdown could be sustained. In this case, lower support at $1,975.04/ounce and $1,949.32/ounce could be crucial levels to look out for, while neckline support is established at $1,932.38/ounce.
Summary
With US inflation data and the Federal Reserve’s interest rate decisions due this week, the gold spot price could consolidate in the Monday session in anticipation of these crucial releases. Support at $1,991.98 could be a critical level to watch out for to determine whether a retracement of the recent channel breakdown is feasible.
Sources: Koyfin, Tradingview, CME Group
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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