Gold’s (XAUUSD) relentless climb continues, with the precious metal touching all-time at $2,171.07 per ounce, poised for a weekly gain of over 3%. This surge is fuelled by a weakening dollar and sliding Treasury yields, as the market anticipates a potential shift towards interest rate cuts by the Federal Reserve. Fed Chair Jerome Powell’s recent testimony hinted at the central bank’s willingness to ease restrictive policies in response to moderating inflation.
The non-yielding bullion’s ascent also finds support in dovish sentiments from central bank policymakers and geopolitical tensions as Chinese investors seek a safe haven amid economic uncertainties. Powell’s remarks, coupled with ECB President Christine Lagarde’s nod towards possible rate cuts, underscore a global trend towards accommodating monetary policies. Additionally, Chinese investors’ shift towards gold amidst economic challenges further bolsters the metal’s safe-haven appeal.
Investors eagerly await the US Nonfarm Payrolls (NFP) data for February, a critical driver that could sway gold prices. A robust NFP report, exceeding the expected 200,000 jobs added, might temporarily boost the dollar, exerting downward pressure on gold. Conversely, a softer-than-expected NFP reading could sustain gold’s bullish momentum.
Technical Analysis
On the 4-hour chart, gold’s price action exhibits a robust bullish trend, trading around the newly-created all-time high of $2,171.07/ounce ahead of the highly anticipated NFP report. Gold has enjoyed a robust bullish accent, which has seen price action close six consecutive sessions in the green, leaving the price action firmly above the upward-sloping 20-SMA (green line), 50-SMA (blue line) and 100-SMA (orange line).
Therefore, softer-than-expected jobs data could preserve the current bullish momentum, likely bringing the 23.60% Fibonacci extension level of $2,192.69/ounce into play in the session. A successful break above the initial extension level, on significant volume, could strengthen the bullish momentum, leaving the 50.00% Fibonacci extension level ($2,216.88/ounce) and 61.80% Fibonacci extension level ($2,227.69/ounce) firmly in play.
However, with the RSI (78.89) already at overbought levels, hotter-than-expected jobs reading could initiate a correction, with the $2,123.33/ounce support level acting as the initial level of interest lower. A sustained push below the initial support would likely bring the $2,079.40/ounce and $2,025.65/ounce within the bears’ clutches in the short term.
Summary
The bulls are in control of the gold market, with the price hovering near record highs. The NFP report will be the major market driver in the coming sessions. A weaker-than-expected report could lead to a breakout towards fresh highs, while a strong report might induce a short-term pullback. Also, the current overbought RSI reading suggests caution, with a potential pullback a possibility regardless of the NFP outcome.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Moneycontrol, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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