Gold Gains Support at $1,850 – Good Time to Go Long?
The price of gold is up to $1,853.70, offsetting some of the price imbalance left over from last week. The US Dollar rallied after the US Nonfarm Payrolls (NFP) numbers, extending the day’s gains. The strong jobs report reinforced the Fed’s stronger rate hike cycle, and the rise in Treasury yields, which depressed demand for bullion, was the straw that broke the vase. The 10-year yield hit 2.99% on Friday, up from the previous week’s low of 2.70% but still below the May 9 peak of 3.20%. The 2-year yield hit a high of 2.69% on Friday, from a low of 2.44% the previous week.
The Labor Department said in its closely watched Labor Report on Friday that nonfarm payrolls in the United States rose by 390,000 last month, far beating forecasts of about 325,000 jobs in May. “The May report supports the view that while the labor market remains firm, it is gradually slowing,” analysts at TD Securities said.
“We believe the report does not change the Fed’s calculus, supporting its preference for early interest rate hikes until it reaches a more neutral stance in the fall.”
This report will have little impact on currency prices, but it indicates that the better the data, the more difficult a pause or a reduced pace of tightening later this year will be.
Upcoming US inflation figures
Analysts believe that the upcoming US Consumer Price Index and MoM readings will be more important for the overall USD momentum. However, core prices likely remained elevated in May, with the series posting its second consecutive 0.5% increase in month-on-month growth.
Previously a drag on inflation, we now expect used vehicle prices to contribute, rising for the first time in four months. However, we also expect the momentum of airline ticket and house price inflation to continue. A rise in the US CPI figures usually leads to increased demand for inflation-hedging assets such as GOLD.
Gold Technical Outlook
Gold made a strong bullish move to $1870; however, the uptrend was short-lived as the precious metal plunged to trade at the $1,853 level.
The close of the candles above the $1,849 support level reinforces expectations for a continuation of the uptrend, which mainly targets 1,870, noting that the price is moving in an uptrend channel, which supports the chances of a breakout. the mentioned level to make additional gains on an intraday and short term.
The uptrend scenario for the market will generally remain operational and dominant over the next few sessions if prices remain above the 1850 and 1838.10 levels. Today’s trading range should be between 1850 support and 1890 resistance. Good luck!