- Gold bears remain in play while below key resistance and eye a break of $1,800.
- US jobs market data is eyed as next key catalyst.
Gold prices fell for a second day on Wednesday although markets stabilised following yesterday’s rout as traders await the February Nonfarm Payrolls this week and Consumer Price Index data next week. at the time of writing, Gold price is flat near $1,1814 and has traded between $1,809.42 and $1,824.30.
Fed Chair Powell’s remarks in his repeat testimony to the House Financial Service Committee were that the Fed is data dependent, and no decision has been made yet about the size of a March hike, analysts at ANZ Bank said. ”This helped to calm price action, despite the fact that Powell’s assessment is that the Fed has underestimated the resilience of growth and inflation recently. Ahead of the March interest rate decision, Powell noted that the Fed will be watching JOLTS, CPI, PPI and the labour market report,” they said, adding, ”we think it will require much weaker data for the FOMC to step back from Powell’s more hawkish assessment of the landscape.”
Meanwhile, Gold price is heavy due to the DXY Dollar index rising to the highest since December after Fed’s Powell said in Tuesday’s Senate testimony that the US economy is shrugging off higher interest rates and emphasised that the Fed was ready to raise rates higher and faster to slow growth and lower inflation. The ICE dollar index was last seen printing 105.66, making gold more expensive for international buyers. Bond yields were also higher, bearish for the metal since it offers no interest. The US 10-year note was last seen paying 3.979%.
US Nonfarm Payrolls eyed
As for the Nonfarm Payrolls, markets anticipate a still firm pace in Feb after an unexpected 517k surge in Jan and the UE rate to stay unchanged at 3.4% with wage growth printing another strong 0.4% for the month. In a deeper dive, analysts at ANZ bank said that ”last year, the US economy created 4.8m nonfarm payroll jobs. In the 2010s, the average annual jobs creation was 2.2m. Returning jobs growth to that historical average pace requires monthly jobs growth to slow to just 180k. Even that may still be too strong for inflation to return to 2.0% given ongoing labour supply issues,” the analysts explained. ”The CBO estimates that the increase in the workforce this year will be 1.2m, and 1.1m in 2024. This would suggest that balancing the labour market requires average monthly jobs growth of 100k or less. Given strong labour market demand, such projections by the CBO imply the scarcity of skilled workers will continue, firms will continue to hoard labour and unemployment may remain at current lows. That just means a more hawkish Fed.”
Gold technical analysis
As for the technical outlook, analysts at TD Securities said, ”a potential break below the $1806/oz level would serve as the next trigger to see trend followers modestly reduce their positions.”
It was explained in the Chart of the Week article, Gold, the Chart of the Week: XAU/USD bulls ride H4 dynamic support on key week ahead that the Gold price was riding dynamic support that would be expected to hold initial tests ”but a break thereof opens the risk of a move to test the $1,825 all-important support structure. A break there will most probably see a flurry of orders triggered and a fast subsequent move lower.”
As illustrated above, we have seen that break happen which leaves $1,800 vulnerable and the $1,770s.