Gold is attempting a tiny comeback near $1,950 after falling $20 to three-week lows on Tuesday. The US Dollar (USD) is down from multi-week highs against its main counterparts. While US Treasury yields are also falling after Fitch downgraded the US credit rating.
Weak US ADP Employment Change data will aid gold price recovery.
Fitch lowered the US government’s top credit rating to AA+ from AAA late Tuesday. Citing a probable budgetary deterioration over the next three years. The US Dollar lost some of its previous gains and tracked renewed weakening in US Treasury bond yields. Supporting the gold market early Wednesday.
The US dollar fails to benefit from the prolongation of risk-off trades. And US Treasury Secretary Janet Yellen’s disagreement with Fitch’s rating. As bets increase for a US Federal Reserve (Fed) rate rise pause later this year. Despite signals that the US labor market is softening.
The same was reinforced by Tuesday’s US JOLTS Job Openings data. Which showed that the number of job openings decreased 34,000 to 9.582 million in June. The lowest level in more than two years. The Fed constantly monitors this indicator since it is a barometer of the country’s labor market demand.
ISM in the United States In July, the index improved less than projected.
Furthermore, the ISM in the United States In July, the index improved less than projected, reaching 46.4 vs. 46.8 expected. The sustained downturn in the US manufacturing sector revived recession fears. While limiting the US Dollar’s slide, which was fueled by the JOLTS report. As a result, the gold price stayed in the red. Despite the fact that the US dollar managed to gain ground on Tuesday.
The World Gold Council’s (WGC) pessimistic study on gold trends also weighed on gold prices. According to the agency, the decrease in central bank gold purchases has contributed to a 2% YoY dip. In global gold demand excluding over-the-counter (OTC) in the second quarter of 2023. According to the WGC research, India’s gold demand in 2023 might plummet 10% year on year, reaching its lowest level in three years.
Looking ahead, all eyes will be on the US ADP. Data on job changes are expected to reveal that the US private sector added 189K jobs in July, down from a stunning 497k job increases in June. Weaker-than-expected US ADP data is likely to add credence to the Fed’s dovish view, boosting gold prices at the expense of the US Dollar.
Wall Street mood will also play a role in US Dollar valuations, as investors change their positions ahead of Amazon and Apple Inc’s earnings on Thursday, as well as Friday’s important US Nonfarm Payrolls announcement.
Technical Analysis
On Tuesday, the gold price fell below the crucial daily support line, closing at $1,951.Meanwhile, the 14-day Relative Strength Index (RSI) is rising. Also became bearish, piercing through the midline to the downside.
As a result, the risks for the gold price look to be skewed to the negative unless the Gold price rebound finds acceptance above the aforementioned ascending trendline support-turned-resistance, now at $1,954. The bullish 21-Daily Moving Average (DMA) is also at that level, making it a formidable upward barrier.
Further up, the 100 DMA at $1,969 will provide severe resistance on the way back up. Prior to that, the $1,960 round figure will put bearish pledges to the test.
A persistent break below the horizontal 50 DMA support at $1,945 will spark a new sell-off toward the July 12 low of $1,932. The next level of support for the gold price is predicted around the $1,925 static support.
