Bullion Forecast: Gold Price picked up renewed bids on Thursday and stormed through the $1,850 hurdle to hit fresh monthly highs at $1,871, surpassing the previous week’s top of $1,870. In doing so, the yellow metal extended Wednesday’s upturn from ten-day troughs of $1,829.
Inflation and Growth
The main catalyst behind gold’s upsurge was the renewed weakness in the US dollar, as the broader market sentiment improved. Falling oil prices on the OPEC+’s output boost decision helped ease concerns over inflation and growth. Meanwhile, cautious remarks from the Fed policymakers Lael Brainard and Loretta Mester combined with a downside in the US ADP Employment Change data accentuated the downslide in the dollar. The US ADP jobs came in at 128K in May vs. 300K expected and 202K previous. The US Treasury yields also slumped amid an uptick in Wall Street indices, as the negative correlation between the two related entities came back into play. Retreating yields underpinned the non-yielding metal.
Gold Forecast: MCX Gold is Nearing its Resistance of 51410: Gold testing bearish commitments at Critical Triangle Resistance on the Daily ChartIn the run-up to the US NFP showdown, gold price is receding from fresh monthly highs of $1,874, as the US dollar pauses its sell-off amid a renewed buying wave seen in the yields. Pre-NFP caution trading also keeps bulls at bay, as traders refrain from placing any aggressive bets on the precious metal. The US economy is seen adding 325K jobs in May vs. 428K booked in April. A downbeat print is likely to add to the recent series of discouraging US economic data, rekindling slowdown concerns while ruling out aggressive Fed tightening expectations in the near term. This could render negative for the dollar, which could help the yellow metal regain its upside traction. Investors will also assess the Fedspeak and the speech by US President Joe Biden for dollar valuations, impacting gold price.
NFP Data
It’s worth mentioning that gold’s reaction to the all-important NFP data could be exaggerated amid the end-of-the-week flows and holiday-thinned market conditions. The Chinese and the UK markets are closed in observance of their respective national holidays.
Thursday’s rally in gold price tested the upper barrier of the three-week-old ascending triangle near $1,870.
Buyers await a sustained break above the latter on a daily closing basis to confirm a triangle breakout, which will open doors towards the mildly bullish 100-Daily Moving Average (DMA) at $1,888.
The next gold bullish target is seen at the bearish 50-DMA at $1,892, above which a test of the $1,900 mark remains inevitable.
The 14-day Relative Strength Index (RSI) is sitting just above the midline, having pierced it a day before, suggesting that buyers could retain control in the near term.
However, if sellers fight back control on an upside surprise to the NFP figure, then XAUUSD could retreat towards the $1,850 psychological level – the previous key resistance.
Further down, the horizontal 21-DMA at $1,845 could come into play. The 200-DMA at $1,841 could help limit the corrective decline in the near term.
The last line of defense for gold bulls is the rising trendline (triangle) support at $1,830.
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Gold Price technical outlook:
Gold Price portrays a one-week-old downtrend as sellers attack a confluence of the 200-DMA and an upward sloping support line from May 18, around $1,842 by the press time. The metal’s recent weakness takes clues from the RSI divergence, as well as the bear cross between the 50-DMA and the 100-DMA.
That said, the RSI’s failure to back the higher low of prices signals that bears are flexing muscles. It’s worth noting that the 50-DMA’s sustained trading below the 100-DMA also keeps the sellers hopeful.
Even so, a clear downside break of the $1,842 support confluence becomes necessary for the XAUUSD sellers before challenging the monthly low near $1,828. Following that, a downward trajectory towards the $1,800 threshold and then to the yearly bottom surrounding $1,786 can’t be ruled out.
Alternatively, a one-week-old resistance line near $1,851 guards the recovery moves of Gold Price ahead of the recent peak surrounding $1,874. In a case where the commodity prices rally beyond $1,874, the 50-DMA and the 100-DMA, respectively around $1,883 and $1,890, could challenge the XAUUSD buyers.
Gold Price once again found strong bids just below the critical support at $1,842 and staged a decent comeback to finish a tumultuous Thursday with mild losses at $1,848. The bright metal remained choppy while keeping its familiar range around the $1,850 price zone. Risk-off flows dominated financial markets. Global growth concerns continued to overwhelm investors, especially after the European Central Bank (ECB) hinted towards a 50 bps rate hike in September to curb elevated inflation expectations. Investors fretted that aggressive tightening outlook by major central banks to quell higher inflation could tip the global economy into recession. Therefore, the safe-haven demand for the US dollar shot through the roof alongside the ongoing strength in the Treasury yields, knocking the bright metal back into the red zone. However, looming growth risks combined with the pre-US inflation release anxiety triggered a broad sell-off in Wall Street indices, particularly in the tech stocks, helping XAUUSD find a floor.