NFPs may limit future gains as Gold posts a triple bottom.

VOT Research Desk

Nov 4

Analytics and Recommendations

• NFP Data Will Be a Catalyst for XAU/Next USD’s Swing.
• China’s Covid Flight Restriction Assisted Gold Rally Could Be Coming to an End.
• Still very much in play is the $1614–$1670 price point.

Fundamental View

Following yesterday’s rebound off the YTD bottom, gold continued to climb higher this morning. The rally took place as markets processed the FOMC meeting’s aftermath and the dollar index began to retrace its losses. The market mood appeared to be further bolstered when speculations that China is considering the idea of reopening air travel after a two-year ban surfaced during the Asian session.

The markets have increased the peak Fed funds rate for 2023 by 25 basis points due to the Fed Chair Powell’s small rhetorical shift. As a result, the dollar gained momentum, making the gold YTD low look fragile.

This seemed to indicate a new YTD bottom and a potential challenge of the $1600 barrier may be in the works, especially when combined with rising US Treasury yields. Bears will continue to exhibit interest as long as the price is essentially flat between $1614 and $1670, which might block any further upward movement as the week comes to an end.

Impacting Events

The first big data release since the FOMC meeting on Wednesday will be the non-farm payrolls released from the US later in the day. The unemployment rate is currently predicted to rise to 3.6%, with 200k new jobs likely to be added. Dollar weakening should result from a weaker-than-expected NFP print since markets may be pricing in a lesser interest rate increase for December. A figure above 200k, on the other hand, may cause the dollar to strengthen and pull gold back down towards its own YTD bottom.

Source: TradingView

Technically, gold has repeatedly rejected the $1670 region; yesterday’s advance lower narrowly missed the bottom limit of the range, which is about $1614. This led to the construction of a triple bottom, which is supporting the argument for additional upswing.

The $1650 region, which also happens to be the 20-SMA, is the first obstacle for bulls to go over, with a break above moving the precious metal toward the $1670 region. This falls line with the 50-SMA, and the long-term downward trend line is located just over it at about $1680.

Support Areas                                      

•1630

•1614

•1600

Resistance Areas

•1661

•1670

•1685

SMA- Daily – Nov 4.