- The gold price has been holding its lows after hitting new monthly lows and recently leveled off.
- A pre-NFP consolidation triggers a corrective bounce from the rising support line five weeks ago.
- Bad sentiment, stronger yields and hawkish Fed keep XAUUSD buyers hopeful ahead of US jobs report.
Gold prices (XAUUSD) remained weak around $1,630, recording a two-day downtrend early on Friday. In doing so, former metals traders are licking their wounds at the lowest level in five weeks as traders await a major US jobs report.
In addition to advance data warnings, the lack of major updates and traders’ reassessment of previous moves heading into the weekend also seem to have explored the recent XAUUSD bearishness.
The US dollar welcomed concerns and strong yields emanating from China, North Korea and Russia, regaining bullish confidence after witnessing a big hit last week, which weighed on gold prices recently.
That said, the US Dollar Index (DXY) rose the most in almost a week despite mixed US data and subdued inflation expectations. In terms of data, the US ISM Services PMI for October fell to 54.4 from 56.7 previously and market consensus of 55.5. Factory orders, however, were in line with forecasts at 0.3%, matching previous measurements that were revised up by 0.2%. US S&P Global Composite PMI and Services PMI eased to 217,000 in the week ending 28 October compared with 220,000 expected for the week ending 28 October, up from 218,000. It should be noted that it was revised upwards from the provisional reading for the month, whereas it eased to 218,000 earlier than that. Meanwhile, 10-year and 5-year breakeven inflation data from the St. Louis Federal Reserve Board (FRED) showed that US inflation expectations fell to their lowest levels on October 19 and 13, respectively.
In the midst of all this, Wall Street benchmarks closed in the red and US 10-year Treasury yields hit a one-week high of 4.22% before slipping back to 4.15%. Notably, his two-year bond coupon in the US rose to his highest level since 2007. It should be noted that the S&P 500 futures posted a small loss and yields have been pushed aside at the latest. This shows the indecision of the market.
In summary, the October US employment report could help XAUUSD traders overcome the lack of momentum. Forecasts suggest headline US NFP could ease to 200K in October from 263K while US unemployment rate could rise to 3.5% to 3.6% . That said, the bearish forecast for the stats due is pointing to a correction move from the critical support line should the unexpected occur.
Also Read: US October Nonfarm Payrolls Preview: Analysis of Gold’s Response to NFP Surprise
Gold prices are struggling to extend the bounce from the support line that has been trending upward since 28th September. The week-old support line is challenging his recovery near $1,632.
The inability to cross a nearby hurdle could also be indicated by a bearish MACD signal and a sluggish RSI (14).
Therefore, unless the price breaks below the immediate resistance around $1,632 support, it is likely to remain lower.
Even if the buyers managed to break the $1,632 hurdle, the 100-EMA and 200-EMA challenged upwards near $1,650 and $1,665 respectively, pointing to a late October peak near $1,675. increase.
Alternatively, the aforementioned support line near $1,620 is key for XAUUSD to fall towards the 61.8% Fibonacci expansion (FE) near $1,605 on Oct 4-26. Following that, the $1,600 threshold could act as an additional filter to the south.
Gold: 4-hour chart
Trend: Expect further declines