- Gold prices retreat from fresh record highs at $2,150 with US yields picking up.
- Investors turn cautious on geopolitical tensions ahead of a busy data week.
Gold price (XAU/USD) has been consolidating within a tight range above $2,070 during the European morning session following a reversal from all-time highs at the $2,150 area.
The US Dollar (USD) is trimming some losses at the week’s opening, with US Treasury yields picking up as the risk appetite witnessed on Friday faded. Investors have turned their focus to a set of high-tier US indicators, with the all-important US Nonfarm Payrolls (NFP) closing the week, for more insight into the Federal Reserve’s next monetary policy steps.
Technical reasons have contributed to the precious metal’s recent pullback, as the strongly overbought levels reached at the mentioned $2,150 level have prompted a profit-taking reaction from Gold buyers.
Fundamentals, however, remain favouring Gold amid a combination of softer inflation and weaker US macroeconomic data. In this context, Fed Chairman Powell’s remarks on Friday, pledging to be careful with rate hikes boosted hopes that the tightening cycle is over, increasing speculation about rate cuts in March.
Beyond that, the increasing tensions in the Middle East have reactivated fears of an escalation of the conflict, which would involve other countries in the region. In China, news about an outbreak of another respiratory virus has increased concerns about another setback for the world’s second-largest economy and hence for the global economic outlook. These concerns are likely to underpin support for the safe-haven Gold.
In the calendar, we have a relevant amount of key US Data, starting with the ISM Services PMI and JOLTS Job Openings data on Tuesday, ahead of Wednesday’s ADP to lay the ground for Friday’s Nonfarm Payroll (NFP) report. These readings are expected to have a relevant impact on US yields and, by extension, on Gold prices.
Daily Digest Market Movers: Gold price consolidates as the US Dollar pares losses
- US Dollar and US yields regain some ground on Monday as the risk rally fades.
- News about an attack on two commercial vessels in the Red Sea has reactivated fears about an escalation of the Middle East conflict.
- US manufacturing data confirmed that the economy is losing pace in the last quarter of the year, which is fueling hopes that the Fed is done with rate hikes.
- US yields dropped sharply after Fed Powell's comments. The benchmark 10-year note lost about 15 basis points to hit fresh 3-month lows below 4.20%.
- According to the CME Fed Watch Tool, markets are now pricing a 51% chance of a 25 bps rate hike in March, from about 40% earlier last week.
- In the economic calendar this week, the ISM Services PMI on Tuesday, followed by the ADP report on private-sector employment on Wednesday and the US crucial NFP report on Friday will attract attention.
- According to a survey by the World Gold Council, 24% of all central banks are planning to build up their Gold reserves in the next 12 months, on concerns about the USD as a reserve asset.
Technical Analysis: Gold remains steady above previous highs with the bullish trend intact
From a technical perspective, the XAU/USD’s corrective reversal has been contained above previous highs at $2,050, which leaves the broader bullish trend intact.
Four-hour charts show the metal standing comfortably above the upward-trending 50-hour SMA, with the RSI retreating from extremely overbought levels.
On the downside, support levels at $2,050 and $2,030 are expected to provide support ahead of the $2,000 psychological level. Resistances are 2,095 and 2,165.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.16% | 0.32% | 0.28% | 0.44% | 0.18% | 0.33% | 0.50% | |
| EUR | -0.17% | 0.17% | 0.12% | 0.29% | 0.01% | 0.19% | 0.35% | |
| GBP | -0.35% | -0.16% | -0.03% | 0.14% | -0.14% | 0.02% | 0.17% | |
| CAD | -0.28% | -0.13% | 0.03% | 0.16% | -0.14% | 0.06% | 0.20% | |
| AUD | -0.44% | -0.32% | -0.15% | -0.20% | -0.31% | -0.12% | 0.04% | |
| JPY | -0.20% | 0.01% | 0.32% | 0.13% | 0.30% | 0.18% | 0.34% | |
| NZD | -0.33% | -0.17% | -0.02% | -0.04% | 0.11% | -0.16% | 0.15% | |
| CHF | -0.52% | -0.35% | -0.17% | -0.20% | -0.04% | -0.34% | -0.15% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
United States Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Why it matters to traders
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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