Gold price is attempting to continue its earlier comeback from the crucial support near $1,940. As the US Dollar (USD) remains vulnerable with slow US Treasury bond rates. In the aftermath of Monday’s poor US economic data.
The US data weakens the US dollar while increasing the value of gold.
Despite a mixed market sentiment and new US-China stories. The US Dollar has entered a downward consolidation period, along with US Treasury rates. A generally weakened US dollar is allowing gold bulls to congregate. set the tone for the next push higher. Asian shares are trading neutral amid a slowdown in the US equity rise. As the latest disappointing economic data from the US dampens risk appetite.
On Monday, gold price had solid two-way trading. Initially losing ground to test crucial support at $1,940, only to find strong demand at the latter to regain the $1,960 round figure. Earlier in the day, the US Dollar maintained its rebound gains, boosted by a strong US Nonfarm Payrolls data. According to the NFP data. The US economy added 339K jobs in May, compared to 190K predicted and an upwardly revised prior number of 294K. The wage inflation component of the jobs report fell to 4.3%. But the unemployment rate remained unchanged. In the reporting period, the US unemployment rate increased to 3.7%, compared to 3.5% expected.
Later in American trade. The US Dollar failed to maintain its prior comeback and succumbed to negative pressure. As a barrage of US economic data fell short of expectations, justifying increased bets on a US Federal Reserve (Fed) rate rise halt next week.
Dismal US economic news dampens risk appetite and drowns the US dollar.
The Institute for Supply Management (ISM) said on Monday that its services PMI fell dramatically to 50.3 in May from 51.9 in April, falling short of estimates of 51.5. Markets were also underwhelmed by all of its sub-indices, including the Price Paid component. US factory orders rose 0.4% in April, following a 0.6% increase in March, but fell short of the 0.5% forecast. The S&P Global Composite PMI for the United States for May was also lowered down to 54.3, raising concerns about the state of the US economy. According to the CMEGroup’s FedWatch Tool, the chance of a Fed pause in June is now about 76%.
In the lack of top-tier US economic data, risk sentiment is expected to be the key driver of US Dollar trading in the near future. It should be noted that the Federal Reserve officials are following the ‘blackout period’ ahead of the June 13-14 policy meeting. As a result, as markets reprice Fed forecasts, the gold price is likely to remain at the mercy of US Treasury bond rates and the US Dollar.
Technical analysis
The gold price has finally bounced off the crucial 100-Daily Moving Average (DMA). at $1,940, after briefly breaking through in the opening part of Monday’s trade.
The negative 21 and 50 DMA Bear Cross, as well as the bearish 14-day Relative Strength Index (RSI), continue to put downward pressure on the gold price.
The 100 DMA, on the other hand, is a difficult nut to crack for gold sellers, creating new demand with each effort to break it.
However, gold is expected to maintain its range play between the 100 DMA and the bearish 21 DMA. The 21 DMA points to $1,977.
Acceptance over the latter will start a significant rebound towards the $2,000 mark. The modestly bullish 50 DMA at $1,991 might come into action first.
Immediate support, on the other hand, is found at the flattish 100 DMA around $1,940. Daily closing price is less than the latter will resume its decline towards the low of $1,918 set on March 17th.
Further south, gold sellers may stretch their biceps and attempt to breach the $1,900 mark.
