The price of gold (XAU/USD) is experiencing a second consecutive day of downward pressure, reaching a one-week low around the $2,025 mark during the early European session on Monday. This decline is attributed to the impact of Friday’s robust US jobs report, which led investors to reassess their expectations for Federal Reserve (Fed) rate cuts, consequently driving up US Treasury bond yields. The resulting surge in yields is viewed as a key factor undermining the non-yielding precious metal.
While the US Dollar (USD) struggles to capitalize on its intraday uptick, facing rejection ahead of the 100-day Simple Moving Average (SMA), there is a potential source of support for the Gold price. Concerns regarding escalating geopolitical tensions in the Middle East and China’s economic situation may help mitigate further downside risks for the safe-haven XAU/USD. Traders are now closely monitoring the US ISM Services PMI and speeches by influential FOMC members for short-term trading opportunities.
Gold Price Remains Depressed Despite Subdued USD Demand and Geopolitical Risks
The release of robust US employment data on Friday has prompted investors to revise downward their expectations for the timing and pace of rate cuts by the Federal Reserve, exerting downward pressure on the Gold price.
The headline Non-Farm Payrolls (NFP) report revealed an addition of 353,000 new jobs in January, nearly double the anticipated 180,000, with the previous month’s figure also revised higher to 333,000 from the initially reported 216,000. Other details included a steady Unemployment Rate of 3.7% and a rise in wage inflation, measured by the change in Average Hourly Earnings, to 4.5% on a yearly basis, exceeding the expected 4.1% increase.
The probability of a rate cut in March has dwindled to approximately 15%, down from over 65% the previous month. Similarly, the likelihood of a 150-basis-point rate cut in 2024 has plummeted to just 25%, a significant decrease from the previously almost certain scenario.
The yield on the benchmark 10-year US government bond has extended its post-NFP rise beyond the 4.0% threshold during Asian trading hours on Monday, propelling the US Dollar to a fresh high since December.
In addition to economic factors, geopolitical events such as Israel’s Prime Minister Benjamin Netanyahu stating that the country will not end the war until all goals are achieved, and reports suggesting Hamas’s rejection of a Gaza ceasefire deal proposed in Paris, may act as a tailwind for the safe-haven gold.
The US Central Command reported a self-defense strike against a Houthi land attack cruise missile and the targeting of four anti-ship cruise missiles in the Red Sea, contributing to the overall uncertain geopolitical landscape.
As traders anticipate the release of the US ISM Services PMI for short-term opportunities later during the early North American session on Monday, the Gold price remains vulnerable to testing the $2,010-$2,009 support and the psychologically significant $2,000 mark.
Technical Analysis: Gold Price Vulnerable, Testing Key Support Levels
From a technical perspective, acceptance below the 50-day Simple Moving Average and a subsequent slide below Friday’s swing low, around the $2,028-$2,027 region, could lead to a downward trajectory for the Gold price.
A breach of the $2,000 psychological mark might shift the bias in favor of bearish traders, exposing the 100-day SMA support near the $1,983-$1,982 region. Further downside risks could see the XAU/USD challenging the crucial 200-day SMA near the $1,965 mark.
On the upside, momentum beyond the Asian session peak, around the $2,042 region, could face resistance near the $2,054-$2,055 zone, followed by the $2,065 area or last week’s swing high. Positive signals from daily chart oscillators could support follow-through buying, lifting the Gold price towards the $2,078-$2,079 region or the year-to-date peak set in January. Subsequent upward movement may enable the XAU/USD to reclaim the $2,100 mark and advance further to the $2,020 resistance level.
