Gold Price Analysis: XAU/USD moves back closer to multi-month tops, above $1,840 level

• Gold buyers defend $1,830 even as Friday’s run-up pauses for fresh push to the north.
• US NFP, Unemployment Rate backed Biden, Yellen and Fed to shrug off rate hike pressure.
• Equities, commodities cheered US dollar’s drop but lack of major reaction afterward confuse the bright metal bulls.

Update: Gold edge higher through the mid-European session and was last seen trading just above the $1,840 level, closer to three-month tops set on Friday. This marked the fourth consecutive day of a positive move and was sponsored by the bearish sentiment surrounding the US dollar, which tends to benefit the dollar-denominated commodity. Friday's disappointing US monthly jobs report reaffirmed market expectations that the Fed will keep interest rates low for a longer period. This, in turn, was seen as a key factor that continued acting as a headwind for the greenback and provided an additional lift to the non-yielding yellow metal.

Meanwhile, bulls seemed rather unaffected by the prevalent risk-on environment, which usually undermines demand for traditional safe-haven assets, including gold. That said, slightly overbought conditions on short-term charts might hold traders from positioning for any further appreciating move amid absent relevant market moving economic releases. Nevertheless, the path of least resistance for the XAU/USD remains up.

Update: Gold price is wavering in a familiar range of around $1835 in the European session, having stopped a few dollars short of the three-month highs of $1843. The sentiment around gold remains buoyed by broad-based US dollar weakness, in the wake of a big miss on the US NFP data. Downbeat comments from Minneapolis Fed President Neel Kashkari also adds to the pain in the greenback. Kashkari, referring to the jobs market, said: "We still are in a deep hole and we still need to do everything we can to put those folks back to work more quickly.”

However, the gold bulls are having a hard time extending the upside break towards the 200-DMA of $1851, as the US Treasury yields are holding onto the higher ground around 1.60%.

Read: Gold Weekly Forecast: XAU/USD could target 200-day SMA

Update: Gold (XAU/USD) defends $1,830, up 0.20% intraday around $1,834.68, as traders prepare for Monday’s European session. In doing so, gold prices react to the US dollar’s failures to keep early Asia’s corrective pullback from the lowest since late February. However, the upbeat US Treasury yields and stock futures keep gold buyers hopeful.

Gold cheers the risk-on mood that initially took clues from Friday’s US Nonfarm Payrolls (NFP) debacle. The latest push to the market sentiment should have arrived from the weekend comments of the Fed Minneapolis Boss Neel Kashkari who said, “The US labor market remains in a “deep hole”, needs aggressive support.” Also on the positive side could be the latest covid vaccine optimism from Eurozone and Australia.

Moving on, gold bulls need to follow the risk catalysts for fresh impetus.

Update: Gold (XAU/USD) is off the three-month highs, consolidating the US NFP disappointment-led rally in Monday’s Asian trading. An impressive bounce in the US Treasury yields combined with the upbeat market mood is capping the upside in the price of gold. The US yields are offering much-needed support to the greenback after the dollar got smashed on awful NFP figures released on Friday. The US economy added a mere 266K jobs in April vs. expectations of nearly a million. Despite the rebound in the dollar and the returns, the dovish Fed expectations are likely to keep gold’s bullish momentum intact. Immediate resistance for gold price is seen at the 200-daily moving average (DMA) at $1851.

Gold (XAU/USD) stays on the consolidation mode around $1,835 during the initial Asian session on Monday. Gold flashed a three-day rally while poking the early February tops on Friday after the US employment report for April helped American policymakers to defend the continuation of easy money policies.

It’s worth mentioning that hopes of further stimulus from US President Joe Biden and receding coronavirus (COVID-19) infections in the West, mainly due to a jump in the vaccinations, are also the reasons the gold buyers might have cheered of late.

Though, gold prices seek fresh push to on the track to the north and hence wobble around multi-day top afterward.

Can Friday’s US NFP defy reflation fears?

A disappointing Nonfarm Payrolls for April, 226K versus a million expected, as well as a 6.1% Unemployment Rate against 5.8% forecasts, helped the US Federal Reserve (Fed) squad, ex-Dallas Fed President Robert Kaplan, to defend their push for extended easy. Following that data, US President Joe Biden said that the jobs report shows the economy is not at risk of overheating. Also in the same line were comments from US Treasury Secretary Jannet Yellen who said, "I doubt we are going to see an inflationary cycle."

The US central bank policymakers have been struggling of late as the jump in inflation figures keep pushing them towards normalization of heavy bond-buying and/or rate hike. The same drag the US dollar index (DXY) and helps gold prices.

Not only the inflation figures but activity numbers and sentiment data also signaled the need to dial back the monetary easing.

Furthermore, US President Biden’s push for more stimulus and infrastructure spending are the additional reasons that magnify the need for the Fed’s alteration of monetary policy.

The Fed’s worries test gold buyers even as the US dollar weakness kept them hopeful.

It should, however, be noted that a one-time disappointment from the US data may not be helpful to tame the reflation fears as US President Biden is all set for another multimillion aid package and the bond-buying are just on the top, propelling the US Treasury yields. Hence, traders will need more clues to extend the latest run-up and hence Thursday’s US Consumer Price Index (CPI) for April will be the key for gold traders.

Ahead of the release, the Australia and New Zealand Banking Group (ANZ) said, “Neither fixed income markets or breakevens bought into a softer inflation or recovery story on Friday night. We don’t think one soft data release alters the robust US growth outlook. Attention now turns to the April CPI release (Thursday). Owing to base effects, the headline number will push up strongly. The median expectations is looking for 3.6% y/y vs 2.6% y/y in March. Core inflation, which was less affected last year when oil prices plunged, is expected to be 2.3% y/y vs 1.6%. It’s all within the Fed’s level of tolerance, but nonetheless, it will be very important to watch the future path of inflation. In that regard, the services (ex-energy services) element of the report will be most noteworthy. Services make up 60% of the CPI and that is where any sustainable rise in domestic inflation pressures will first become evident. Last time, that component rose 0.4% m/m.”

For the short-term direction, the coronavirus (COVID-19) updates and the vaccine plans, recently cheered by the European Union (EU), could help gold traders. Further, chatters concerning Brexit and the Scottish election may probe the gold bulls as both of them weighs on the market sentiment.

Talking about the data, second-tier figures from the US and China’s CPI could entertain gold traders ahead of the key Thursday.

Gold Forecast: XAU/USD could target 200-day SMA

There won’t be any significant macroeconomic data releases at the start of the week and XAU/USD is likely to move in accordance with the technical picture.

On Wednesday, the Consumer Price Index (CPI) data will be watched closely by market participants. Investors expect the Core CPI, which strips volatile food and energy prices, to rise to 2.3% on a yearly basis in April. In March, the annual Core CPI climbed to 1.6%, compared to analysts’ estimate of 1.5%, and caused T-bond yields to fall sharply, suggesting that investors look for a significant jump in inflation to start pricing tapering. A reading above 2.5% could lift the USD and weigh on XAU/USD but a softer-than-expected print could trigger another selloff.

Read: Gold Weekly Forecast: XAU/USD could target 200-day SMA

Commodity prices hit all-time highs – What's next? [Video]

The surge in commodity prices shows no signs of slowing down with everything from the metals, energy to agriculture markets, scaling multi-year highs.

Last week, Iron Ore broke $200 a ton for the first time ever. Palladium broke above $3,000 to hit a new record high and Copper prices soared more than 10% to surpass an all-time high.

The bullish momentum also split over into the precious metals with Gold posting its best week since November 2020, while Silver prices jumped 6% to record their biggest weekly gain in 3-months.

Read: Commodity prices hit all-time highs – What's next? [Video]

Technical analysis

Gold keeps an upside break of the 100-day SMA directed towards the 200-day SMA, respectively around $1,796 and $1,850, around $1,833 by the press time. However, the buyers seem to struggle recently, as portrayed by overbought RSI and Momentum indicator.

Although pullback moves may retest the previous resistance line from March 18, near $1,823, the $1,800 threshold and multiple highs marked since late April around $1,796-98 can test the further downside by gold prices.

It should, however, be noted that a daily closing below $1,796 will direct gold sellers towards a six-week-old support line near $1,785 that holds the key to the bright metal’s further weakness towards mid $1,700s.

Meanwhile, a clear break above the 200-day SMA level of $1,850 may need to cross the February 10 high of $1,855 before challenging the February month’s peak of gold surrounding $1,875.

Overall, gold prices are on an upward trajectory but need a strong push to keep the recent rally.

Gold price daily chart

Trend: Pullback expected