Gold Analysis ahead of NFP

7 janv. 2022

Gold price continued to fall on Thursday, ending the previous sell-off and hitting eleven-day lows at $1,785. The gold market had been ridden by hawkish Fed outlook-led rallies in the US Treasury yields over the past few weeks.

Wednesday's FOMC minutes surprised the hawks to the upside after it revealed that the policymakers discussed balance sheet run-off at their December meeting. Additionally, there was strong American job data released on Tuesday that pushed against expectations for a slowdown in economic growth.

This news led to increased speculation among traders about potential
Repositioning in the Gold market during this week's session amid increasing global political risk and waning prospects of solid wage data from America.

Gold prices are up slightly towards $1795 after a fresh uptick in the jobs market and positive news from the US. American is seen adding 400K jobs in December vs. 210K created previously, with a potential downtick in the participation rate.

With solid job numbers expected to bolster expectations of aggressive Fed rate hikes, gold will likely succumb to renewed pressure from Treasury yields on this hiring blowout while greenback prices also ride the economic optimism wave.

Only a big miss on labor market reports could offer some temporary reprieve to bulls as hawkish narrative remains intact going forward - another key indicator for the watch during Omicron Covid updates.

The gold price continued its slide towards $1785 after breaching all the major support levels including the December 21 low of $1785 and December 29 low of $1789. Thursday's sell-off followed by the latest rebound has carved out a bear flag pattern on the time.

A four-hourly candlestick closing below the rising trendline support at 1,789 will confirm that this is a continuation of the same bearish formation. This would call for a retest of $1,785 as seen in past efforts to break above this level.

When it comes to cushioning the market during selloffs, a significant level of gold is required. This occurs at the December 16 trough of $1775 where fresh bearish positions will be created. On the flip side, breaking above surging trendline resistance at $1796 would invalidate any potential bullish engagement and prompt a meaningful recovery closer to mildly bullish 100-SMA (at $1,802) followed by downside extensions towards 50-SMA (near 1,830) if this sentiment holds. The weekly highs near 1 830 may once again become buyers’ alarms given current levels of strength within that region.