Aximdaily
Gold Pinned Near YTD Low as Focus Turns to US NFP

Gold Pinned Near YTD Low as Focus Turns to US NFP

Gold struggles to recovery holding near two-month low on Thursday weighted by the hawkish comments of Federal Reserve Chair Jerome Powell and better-than-expected US labor data.

Gold prices held steady just above their YTD low amidst lingering worries over increasing U.S. interest rates and anticipation for upcoming labor data to ultimately determine if more hikes are on the horizon.

Earlier this week, Federal Reserve Chair Jerome Powell sent out hawkish signals that rattled the yellow metal. He suggested that interest rates could climb higher than estimated due to favorable economic figures, and the central bank is willing to raise interest rates at a faster pace if necessary.

Following Powell’s extremely hawkish comments, gold XAUUSD slumped from $1851 to $1812 on Tuesday. Meanwhile, the dollar soared to its highest levels in three months. Simultaneously, Treasury yields skyrocketed as traders bet that the Federal Reserve would soon implement more aggressive rate hikes.

As the attention shifts to Friday’s nonfarm payrolls report, any more indications of a robust labor market will only serve as further encouragement for the Fed to hike interest rates faster.

Probabilities of Fed raising interest rates by 50 bps in March are nearly 80%, up from 9% just one month ago, according to CME Group’s FedWatch Tool. 

Wednesday’s flash data for gold futures markets revealed that traders extended the uptrend by increasing their open interest positions by 1.2K contracts. Volume, however, continued to remain choppy, decreasing significantly by 21.8K contracts.

Although gold’s price action appears indecisive, as increasing open interest implies that further consolidation is likely in the short-term, a possible descent to its 2023 low near $1800 per ounce is not ruled out.

Powell’s hawkish remarks regarding potential interest rate hikes if necessary, combined with the positive job market indicators are posing a threat to gold XAU/USD’s recovery on the short-term.

Figures released on Wednesday revealed that US private employment was higher than expected during February, another sign of labour market strength. As of now, investors are pricing in a better-than-expected NFP data that would support the Federal Reserve in lifting interest rates by 50 basis points this month. 

Gold Technical Overview

Gold spots printed a mild recovery in the recent hours, up by 0.19% at $1817. Looking at the hourly chart, XAUUSD is stuck in a sideways trading after the sharp fall from Tuesday. The rebound is expected to be short-lived shall the US data shows better-than-expected performance. 

Any short-term recovery to be capped by the higher range at $1824, with next resistance at $1830. On the downside, breaching the lower band would extend recent downtrend towards YTD low at $1804 printed in February. 

Gold XAUUSD hourly chart

Gold XAUUSD Analysis

USD Holds Steady Ahead of NFP

The U.S. dollar index (DXY) declined slightly at the beginning of European trade on Thursday, however it remained near its highest levels in over 3 months as data spurs expectations for further interest rate hikes to curb inflation. 

On Wednesday, Powell showed up for the second day of semi-annual testimony to the House Financial Services Committee. He reiterated his prior statements that the Federal Reserve will probably hike rates beyond what was originally anticipated, potentially with larger jumps due to recent economic reports indicating stronger than expected economic activity and lingering inflationary pressures.

He did, however, emphasize that the discussion concerning possible rate hikes in the future – including a probable hike in March – remains open and will be determined based on data.

Following Powell’s statement, the U.S. 2-year Treasury yield skyrocketed to a 16-year high of above 5.5%, subsequently inverting the 2-10 year curve by 110 bp, spurring fears of a recession approaching soon.

free online forex course