Gold (XAU/USD) started the new week under bearish pressure and fell by nearly 1% on Monday. Speaking at the annual meeting of the National Association for Business Economics, Federal Reserve (Fed) Chair Jerome Powell refrained from giving any new hints about the next policy move.
Policy Decisions
Powell reiterated that risks are two-sided and that they will make policy decisions on a meeting-by-meeting basis. He said, “The Fed is not in a hurry to cut rates quickly, will guide based on the data.” These comments allowed the USD to maintain its position and forced the yellow metal to stay behind.
Although the USD maintained its strength on Tuesday after the US Bureau of Labor Statistics (BLS) reported that JOLTS job openings rose to 8.04 million in August from 7.71 million in July, gold benefited from rising geopolitical tensions and gained more than 1% to erase all of Monday’s losses. Reports of Israeli forces’ ground invasion of Lebanon rekindled fears about a deepening and widening conflict in the Middle East.
Geopolitical Tensions
On Wednesday morning, news of Iran firing nearly 200 ballistic missiles at Israel and Israel vowing to respond to the attack helped boost gold demand. Israeli Prime Minister Benjamin Netanyahu said Iran had made a “big mistake” and “will pay a price for it”, further escalating tensions. However, while the USD recovered in the second half of the day, the gold struggled to maintain bullish momentum and closed the day little changed. Automatic Data Processing (ADP) reported that private sector employment increased by 143,000 in September, surpassing market expectations of 120,000 and supporting the USD.
ISM Services Data
Data published by the Institute for Supply Management (ISM) on Thursday showed that business activity in the services sector continued to grow rapidly in September, with the ISM Services Purchasing Managers Index (PMI) rising to 54.9 from 51.5 in August. The US dollar took advantage of this report and made it difficult for gold to make a comeback.
Gold’s Technical Forecast
The Relative Strength Index (RSI) indicator on the daily chart moved slightly below 70, reflecting sellers’ reluctance to bet on an extended decline. On the downside, the midpoint of the ascending regression channel since late June forms the first support at $2,625. If this level fails, the next support can be seen at $2,603 (20-day simple moving average (SMA), stable level) before $2,582 (lower boundary of the ascending channel).
Looking north, interim resistance appears to be forming at $2,685 (stable level) before $2,707 (rounded level, upper boundary of the ascending channel).
On Friday, the BLS announced that non-farm payrolls (NFP) increased by 254,000 in September, significantly higher than the market’s expectation of 140,000. Additionally, August’s NFP increase of 142,000 was revised upward to 159,000. Other details of the employment report showed that the unemployment rate fell to 4.1%, while annual wage inflation, measured by the change in average hourly earnings, rose to 4% from 3.9% in August. Gold failed to make a comeback even after positive US labor market data.
