After hitting a three-week high, Gold turned neutral and traded flat today. As traders stayed sideline ahead of nonfarm payrolls data due later in the day.
Prices witnessed a meaningful rally since the start of the week as a string of weak U.S. economic readings spurred bets that the Federal Reserve will keep rates on hold in September, which in turn dented the dollar.
However, the dollar witnessed a small recovery yesterday after data showed personal consumption expenditures- the Fed’s preferred inflation gauge- remained sticky in July, while personal spending grew more than expected. This saw gold consolidate some weekly gains.
Nonfarm payrolls data will decide the near future trend – Now, focus is shift on nonfarm payrolls data for August, data is foreseen at 169k lower from 187k. A weaker than forecast jobs data may create a probability for a pause of rate also set to release which will have a strong impact on the prices. At the same time, ISM Manufacturing PMI and Unemployment Rate, is set to release which will have strong impact on the prices.
Further, any signs of strength in the labor market, coupled with sticky inflation, may support the prospect of a more rate hike in the coming policy. While the central bank may not hike rates in September, it is still expected to keep interest rates at over 20-year highs for longer.
Rising rates had battered gold through the past year as the opportunity cost of investing in non-yielding assets increased. The yellow metal’s near-term prospects are also dimmed by rates likely remaining higher for longer.
Technical Outlook
Since the start of the week, gold prices witnessed a smart recovery from the low 58671 and tested 59563 high. Today, prices traded at 59473 up 0.17% compared to the previous day’s close of 59374.00.
On the above chart, prices trading near to a massive resistance 59570 coincided with 20 SMA. Further, RSI 14 and its 9 SMA is giving a positive crossover. Both of the above indicate bullish momentum in the near future.
However, prices would need to break above 59570 in order to test 59900-60250.00 Else, failure of the break will witness some pressure and prices may retreat towards 59200-59050 again.
Traders may go long above 59570 for target 59900-60250.