- Despite a weaker USD, the gold price is struggling to capitalize on its modest comeback gains.
- A further increase in US bond yields curbs USD losses and caps metal gains.
- Traders were hesitant to take bullish wagers ahead of the US non-farm payrolls announcement on Friday.
Silver Price Analysis: XAG/USD tumbles over 5% as Silver whipsaws for Friday
— Malaikah Raja (@Malaikahraja001) September 29, 2023
During the first part of the European session on Thursday, the gold price (XAU/USD) surrenders its modest intraday recovery gains and returns to the lower end of its daily range, around $1,820. The precious metal received a tiny boost as a result of a minor intraday US Dollar (USD) decline, but there was no follow-through purchasing.
Meanwhile, the initial market reaction to Wednesday’s somewhat lackluster US macro data was short-lived, owing to growing acceptance that the Federal Reserve (Fed) will maintain interest rates higher for longer.
Meanwhile, hawkish Fed views cause a new leg higher in US Treasury bond yields, assisting the US Dollar (USD) to halt its corrective decline from an 11-month high and attracting new sellers around the Gold price. The XAU/USD, on the other hand, manages to stay above the $1,815 mark, which it touched on Tuesday for the first time since March.
Classic US gold. Better than bullion, or would you rather have modern? pic.twitter.com/OG3R7riTFP
— Gold Eagle Price (@goldeagleprice) September 28, 2023
Traders appear to be betting aggressively and preferring to wait for more clarification on the Federal Reserve’s (Fed) future policy decision, especially following the mixed economic statistics given by the United States (US) on Wednesday.
According to a survey released on Wednesday by Automatic Data Processing (ADP), the job market in the United States (US) is cooling. Furthermore, a survey conducted by the Institute for Supply Management (ISM) revealed a slowing in the US services sector, providing the Fed with an incentive to cease rising interest rates.
This causes a correction in US bond yields and urges traders to reduce their USD bullish wagers. The US macro data continues consistent with projections for good third-quarter economic growth, allowing the Fed to keep rates higher for longer.
Furthermore, recent remarks by multiple Fed members bolstered the case for additional policy tightening to return inflation to the 2% objective, leaving the door open for at least one more Fed rate hike in 2023. As a result, it is prudent to await strong follow-through buying before concluding that the Gold price has established a near-term bottom and positioned for any meaningful recovery rise. Market traders are now looking for short-term possibilities in the release of the US Weekly Initial Jobless Claims later in the early North American session.
Bond yields in the US have been on the rise since 2020. From a low of below 1%, the 10-year yield at the time of publication is over 4.5%.
Yes, inflation is still elevated and interest rates are thus remaining high, but are there other factors at play? https://t.co/wfRgHgajJc
— Ninety One UK (@ninetyone_uk) October 5, 2023
Daily Digest Market Movers: Gold price fades an intraday uptick amid Fed rate hike jitters
The gold price tried a slight intraday comeback from its lowest level since March, but the rally peaked near $1,830 during the early European session.
The benchmark 10-year US Treasury yield remained near the 16-year high reached on Tuesday, limiting the USD’s corrective drop from its highest level since November 2022.
The downside is restricted for the time being, given the uncertainty surrounding the Federal Reserve’s (Fed) next policy move and the importance of the US monthly jobs report (NFP) on Friday.
According to the US ADP data, private-sector businesses added 89K jobs in September, compared to the previously corrected number of 180K.
Long-term returns for US Treasury bond funds w/ a constant maturity (like IEF, TLT and SHY) are quite predictable simply using initial yields as an estimate.
What do we do with that knowledge? That depends on whether you're a tactical or B&H investor.https://t.co/JV8IszZUu5
— AllocateSmartly (@AllocateSmartly) October 5, 2023
The US ISM Services PMI fell from 54.5 to 53.6 in September, prompting investors to reduce their expectations on another Fed rate hike by the end of the year.
The Fed is projected to maintain its hawkish attitude and keep interest rates higher for longer, putting a damper on any major recovery for the XAU/USD.
The US NFP report will now be scrutinized for clues regarding the Fed’s potential rate-hike path, which should assist determine the next leg of the metal’s directional move.
Technical Analysis: Gold price seems poised to weaken further towards the $1,800 mark
Technically, the absence of follow-through purchasing and the emergence of new selling at higher levels indicate that the path of least resistance for the Gold price is downward. As a result, a continuing drop near $1,815, or a multi-month low reached on Tuesday, appears to be a distinct possibility. The next relevant support is located at the $1,800 round-figure mark, which if decisively broken will reveal the following relevant support located near the $1,770-1,760 zone.
On the other hand, the daily swing high, which is currently around $1,830, appears to be acting as an immediate strong resistance. A persistent advance above $1,850, on the other hand, might spark a short-covering rally and propel the Gold price to the $1,858-1,860 barrier.
On the other hand, a multi-month low of $1,815 appears to have developed as an immediate strong support. This is followed by the $1,800 round-figure mark, which, if forcefully broken, will reveal the next key support near $1,770-1,760.
- Gold Rebounds From a Prolonged Low Amid Market Caution; Still Facing Challenges
- USD/CHF Ascends Past 0.9200 Following Swiss CPI Release
- NZD/USD remains flat below the mid-0.5900s amid China property market woes, eyes on US GDP data