Search ForexCrunch
  • Gold has been on the backfoot since the FOMC presser where Powell bid-up the dollar following an upbeat assessment of the Fed’s position on a robust U.S. economy.  
  • Gold is currently trading at $1,271.66oz within a range of $1,266.39oz and $1,278.02oz.

Gold prices have made a technical move which opens prospects for either a full-on breakdown or a strong correction. From a fundamental standpoint, Powell’s a hawkish statement where he views the recent weakness in inflation as transitory in nature leans on the bearish side for gold which saw gold bugs capitulate yesterday on his statements with some follow-through today as the greenback solidifies its own correction higher – (DXY +0.22%).

“We continue to suspect that the current rally in gold will need to be substantiated with weakening US data before the yellow metal can take a run at higher prices. In this context, we suspect that gold and silver prices could remain range-bound for the time being,”

analysts at TD Securities argued.  

Nonfarm payrolls to shake gold out off range?

  • Non-Farm Payrolls: ADP and ISM point in different directions

However, we have nonfarm payrolls to go yet this week and an outliner report, one way or the other, should offer a material shift in the price of the dollar on the knee jerk. Such an event could well push the barriers in gold and if the data was an outstanding improvement on last month’s, which would buffer the negative impact that the last GDP and ISM manufacturing numbers (US manufacturing PMI) , the dollar could rally towards 98.20 and beyond, force 10s higher in the 2.40-2.60% range, and thus equating to a run on sell stops in stale longs, opening a technical case for a critical confluence area on the charts to the downside. On the flipside, a weaker print, (particularly on wages), would likely sink the dollar and support gold headed back towards 1290 territory.  

Gold levels

The key confluence area is where the 200-DMA meets that 50% Fibo down at 1253. A breakdown there opens the 61.8% Fibo target at 1231 which meets the mid-Dec lows/Oct resistance. Meanwhile, the price is held at the 1266 support level (The target area pointed out yesterday, here:  Gold bears take back the baton post FOMC and Powell’s bullishness and here:  Gold Technical Analysis: There are prospects are for a run down to the 200-D EMA).

Gold Daily chart (Bearish target)