- Pre-NFP caution, Delta covid woes weigh on the mood, lift the dollar.
- US NFP will hold the key for Fed’s next policy action amid hawkish expectations.
- Gold’s daily setup points to deeper losses if the death cross gets confirmed.
After a volatile Wednesday, gold price resumed its downtrend on Thursday and breached the $1800 level before recovering to $1804.48 at the close. Despite the rebound, gold price posted heavy losses, as the buying interest around the US dollar remained unabated, underpinned by firmer Treasury yields. The revival of expectations of the Fed’s monetary policy normalization, amid upbeat US economic data and the recent hawkish comments from Vice-Chair Richard Clarida and Governor Christopher Waller, boosted the yields alongside the dollar. Meanwhile, the greenback also continued to draw safe-haven demand due to the escalating Delta covid variant concerns, which collaborated with the downside in gold price. The deadlock on the US $1 trillion infrastructure bill and a mild hawkish tilt from the BOE exerted additional bearish pressure on the yellow metal.
In the run-up to the US Nonfarm Payrolls (NFP) showdown this Friday, gold is extending the previous declines, flirting with the key $1800 level. The greenback continues to hold the higher ground, in anticipation that a stronger NFP report could add credence to the hawkish rhetoric by the Fed. In that case, investors could dump the non-yielding gold while stocks could also take a beating amid worries over stimulus rollback. The US economy is expected to add 870K jobs in July vs. 850K recorded in June. Although the US jobs data is likely to remain the main market driver, the covid updates and infrastructure news could be eyed as well.
Gold Price Chart - Technical outlook
Gold: Daily chart
The daily technical chart shows that gold price has breached the key 21 and 100-Daily Moving Average (SMA) at $1810 and $1805 respectively.
The risks remain to the downside for gold price amid a looming death cross on the daily time frame. The 50-DMA is fast approaching the 200-DMA, looking to pierce through the latter from above.
The 14-day Relative Strength Index (RSI) inches lower below the midline, suggesting that there remains more room for the downside.
Immediate support is seen at the range lows around $1790, below which a sell-off towards the multi-month lows of $1751 could be in the offing.
On the flip side, gold bulls need to recapture the previous support now resistance at 100-DMA, above which the 21-DMA could test the bullish commitments.
Powerful resistance at the 50 and 200-DMAs confluence at $1819 could emerge as a tough nut to crack for gold buyers.
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