This Wednesday, gold is expected to extend its downtrend for the third consecutive day, as bears collect momentum for the next push below.
US dollar has reached three-month highs as US 10-year Treasury note rates return to 4.0%.
The US Dollar (USD) has gained another leg to the higher, reaching its highest level in three months when compared to its key competitors. On Tuesday, Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee. On the semi-annual monetary policy report, triggering a much-anticipated rise in the US Dollar across the board, knocking gold to its lowest level in five trading days at $1,813. The benchmark 10-year US Treasury note rates reclaimed the carefully watched 4.0% level, sending US Treasury bond yields to new multi-month highs. When a wave of risk aversion rippled across the financial markets; Wall Street indices fell around 1.50% on the day.
Investors would suffer as a result of Federal Reserve Chair Jerome Powell’s aggressive remarks.
During his testimony, Federal Reserve Chairman Powell stated, “If the totality of the evidence indicates that greater tightening is appropriate. We would be prepared to accelerate the pace of rate rises.” He also stated that the “final level of interest rates” is likely to be higher than previously predicted. These were Powell’s statements that US Dollar bulls were hoping to hear in order to raise expectations for a 50-basis point (bps) rate rise on March 22. In the meanwhile, markets began pricing in a top rate of around 6% this year in response to hawkish comments.
Meanwhile, gold traders will be looking forward to the ADP Nonfarm Employment Change data from the United States. Which is a prelude to the all-important Nonfarm Payrolls report on Friday. The ADP employment report is expected to show 200K new jobs were added in February, up from 106K the previous month. Nevertheless, the US Nonfarm Payrolls data on Friday will show 200K job adds last month, compared to the remarkable rise of 517K recorded in January. A solid US employment report is key to securing the Fed’s 50 basis point rate rise in March.
Apart from the US ADP payrolls data, the gold price will be influenced by the JOLTS Job Openings data. Which might signal tighter labor market conditions in the US, hurting US Dollar values.
Gold Technical Outlook
Gold bears were successful in achieving a daily close below the bearish 21-Daily Moving Average (DMA), which was then at $1,844.
Furthermore, a significant sell-off in the gold market undermined the solid static support at $1,830.
Despite the current downturn, gold is ready to test the important support level of $1,805, where the bullish 100 DMA and the February 28 bottom converge.
On the plus side, the gold price has continued to face severe opposition near the $1,860 static barrier level.
If the downside gains traction, a sustained break below the previously indicated support level of $1,805 will confirm a parallel channel collapse.
Gold’s next bearish target The price is currently expected to be around the flat 200 DMA of $1,775. Prior to that, the $1,800 round level and $1,790 might put the bullish pledges to the test.
The 14-day Relative Strength Index (RSI) is safely below 50.00, confirming the bearish tendency. Any rebound attempts, on the other hand, will require acceptance above the strong support-turned-resistance at $1,830, above which the bearish 21 DMA, presently at $1,838, will enter the picture.
Because of Fed Chair Jerome Powell’s hawkishness, gold price broke through key important support levels on Tuesday.
