GOLD PRICE (XAU/USD) OUTLOOK
- Gold deepens its retracement as U.S. yields and the U.S. dollar push higher
- The U.S. jobs report will steal the limelight later this week
- This article examines key XAU/USD’s levels to watch in the coming days
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Most Read: Gold Prices Slip as US Dollar, Yields Blast Higher; Nasdaq 100 Slumps
Gold prices (XAU/USD) sank on Wednesday, weighed down by rising Treasury rates and the U.S. dollar. For context, bond yields have pushed sharply higher over the past few sessions, with the 10-year note coming within striking distance from recapturing the psychological 4.0% level after trading below 3.80% last month.
The following chart shows recent market dynamics.
US Treasury Yields, DXY and Gold Performance
Source: TradingView
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Taking into account today’s moves, bullion has retreated more than 2.7% from its late December high, as investors have started to embrace a more cautious position, speculating that overbought conditions and euphoric sentiment post the Fed pivot could pave the way for a reversal in early 2024.
While gold retains a constructive profile, the upward trajectory won’t be linear, leaving room for minor corrections within the broader uptrend. In any case, we’ll have more clarity on its outlook later in the week when the Bureau of Labor Statistics releases the latest employment report.
Traders should closely watch the nonfarm payrolls survey for clues about the health of the labor market. That said, if hiring remains robust, interest rate expectations may drift in a more hawkish direction, reinforcing the recovery in yields and the greenback. This would be a bearish outcome for gold.
On the flip side, if job growth disappoints market forecasts by a wide margin, monetary easing bets for 2024 will be largely validated. This scenario would exert downward pressure on yields and the U.S. currency, creating favorable conditions for the yellow metal to resume its upward journey.
The image below shows what analysts anticipate for the upcoming NFP report.
Source: DailyFX Economic Calendar
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GOLD TECHNICAL ANALYSIS
Gold suffered a major setback on Wednesday after breaking below technical support in the $2,050-$2,045 band. If bullion remains below this threshold for an extended period, sellers might gather impetus to drive prices toward the 50-day simple moving average near $2,010. Continued weakness could shift the focus to $1,990, followed by $1,975.
In case sentiment shifts in favor of buyers and XAU/USD restarts its climb, overhead resistance appears at $2,045-$2,050. Although overcoming this obstacle might prove challenging for the bulls, a successful breach could pave the way for a retest of the late December peak. Further strength could redirect attention to the all-time high near $2,150.
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| Change in | Longs | Shorts | OI |
| Daily | 1% | -15% | -6% |
| Weekly | -4% | -17% | -10% |