In a tumultuous week for the Gold Spot Price (XAUUSD), its trajectory faced a sharp reversal, plummeting by 75 basis points on Friday. This abrupt downturn erased the gains from four consecutive days, during which the precious metal surged by 2.33%.
The catalyst for this market upheaval was an unexpectedly robust labour market report that bolstered the Greenback. January’s nonfarm payrolls revealed an astonishing addition of 353,000 jobs, nearly doubling economists’ projections and casting a shadow on the upward potential of the Gold Spot price. Wages, showcasing remarkable resilience with a 4.5% year-on-year increase, added to concerns about inflationary pressures.
As traders adjusted their outlook, diminishing the likelihood of a March rate cut from 64.0% a month ago to 17.5%, the Greenback experienced a boost, reaching an eight-week high against major currencies. The evolving anticipation among traders for U.S. PMI reports and jobless claims is crucial to determining whether the strong economic and labour market performance will validate the maintenance of higher interest rates, potentially exerting additional influence on the Gold Spot Price.
Technical
The Gold Spot Price kicked off the new week on a lower note, shedding 79 basis points. Initially trapped in a downtrend within a descending channel pattern beneath the 100-day moving average, a noteworthy shift in sentiment unfolded last week.
Breaking free from the descending channel and surging past the 100-day moving average marked a pivotal moment. This upswing commenced from the 2001.79 per ounce level, acting as a support level amid oversold RSI conditions, reaching as high as 2065.42 per ounce. However, Friday’s upbeat fundamental data triggered downside pressures, bringing the spot price towards the 61.80% Fibonacci Retracement Golden Ratio.
A potential reversal hinges on the Golden Ratio serving as an intermediate support, with the 2065.42 per ounce level potentially looming if it holds. Conversely, a breakdown below the Golden Ratio, accompanied by high downside volumes, could open the door to a retest of the 2001.79 per ounce level.
Summary
The Gold Spot Price, facing a tumultuous week, saw a sharp reversal amid a robust labour market report, which tempered rate cut expectations. Technical analysis reveals a pivotal moment as the spot price surged from 2001.79 to 2065.42, but Friday’s upbeat data introduced downside pressures, emphasizing the critical role of the 61.80% Fibonacci Retracement Golden Ratio.
Sources: U.S. Bureau of Labor Statistics, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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