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- Gold price nurses losses after Friday’s stellar US NFP-led sell-off.
- US Dollar, Treasury bond yields stay firm amid risk-aversion and Powell’s pushback.
- Gold price remains a ‘buy the dips’ trade, as a strong support holds and daily RSI stays bullish.
Gold price is licking its wounds above $2,030 in the Asian trading hours on Monday, having corrected sharply from monthly highs on Friday. The US Dollar (USD) stays supported alongside the US Treasury bond yields, following the blowout US Nonfarm Payrolls (NFP) report and Federal Reserve (Fed) Chair Jerome Powell’s interview.
Will Middle East geopolitical woes save Gold price?
Friday’s US labor market report showed that the US economy added a whopping 353K jobs in January, against the 180K expected. Meanwhile, the previous figure was sharply revised up to 333K. The data suggested unrelenting resilience in the US employment sector, killing hopes of early Fed interest rate cuts.
The dialing back of Fed rate cuts for this year received a fresh thrust after Fed Chair Jerome Powell, in an interview aired early Monday, dismissed a rate cut next month while pushing back against the timing of the rate cuts.
Powell said, “with economy strong, we feel we can approach rate cut timing question carefully. Confidence is rising, but want more confidence before taking ‘very important step’ of starting rate cuts.”
The US Dollar and the US Treasury bond yields cheer the pushback against early rate cut expectations by the Fed, keeping Gold price in a downside consolidative phase. The current market positioning suggests an 85% probability that the Fed will stand pat on interest rates next month while for May, the odds of a rate cut stand at about 65%.
Despite the persisting conditions against the Gold price, the traditional safe haven could still find support from escalating geopolitical tensions between the West and the Middle East. Amidst the latest updates, US Central Command (USCENTCOM) confirmed on Monday that “on Feb. 4, at approximately 5:30 a.m. (Sanaa time), forces conducted a strike in self-defense against a Houthi land attack cruise missile.”
In retaliation, the Iran-backed Yemeni Houthi militant group pledged on Sunday to extend their military operations and threatened to respond to the latest set of strikes by the US and the UK over the weekend.
If risk-aversion intensifies due to geopolitical tensions, Gold price could attempt a rebound but the safe-haven flows into the US Dollar could limit Gold buyers. Traders will also look forward to the ISM Services PMI and S&P Global final Services PMI data for fresh trading impetus on Gold price.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price managed to close the week above the critical support in the $2,030-$2,035 region, despite a steep correction. That level is the confluence of the triangle resistance-turned-support, 21-day and 50-day Simple Moving Averages (SMA).
Further, the 14-day Relative Strength Index (RSI) indicator remains above the 50 level, suggesting that a Gold price rebound could be in the offing.
Therefore, Gold buyers remain hopeful so long as the abovementioned demand area between $2,030-$2,035 is held up.
If the latter gives way, a fresh leg down could be seen, targeting the triangle support at $2,018.
The next relevant cushion is seen at the $2,010 round figure, below which the $2,000 barrier will be a tough nut to crack for Gold sellers.
On the upside, the immediate strong resistance is seen at the monthly top of $2,065. Further up, the $2,070 round figure could challenge bearish commitments, as Gold optimists aim for the $2,100 threshold.
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