At the end of last week's trading and amid the strong and sudden rise in the price of the US dollar following the announcement of stronger than expected figures for US jobs, the XAU/USD gold futures fell below $1900 to end the week's trading down.
- This is contrary to the performance throughout the week's trading.
- Last week's gold gains extended past the resistance level of $1,960 per ounce, the highest it has been in nine months.
- Strong selling operations caused prices to decline towards the support level of $1,862 per ounce, the lowest gold price in a month.
It has often been pointed out that the gold gains have pushed the technical indicators towards a strong saturation level by buying and can be corrected by sales to reap the profits at any time. Gold prices ended the week's trading with a loss of about 2.25%, but it remains high by about 3% since the beginning of the year 2023 until its date. In the same performance, the prices of silver, the sister commodity of gold, fell below 23 dollars. Accordingly, the price of the white metal also recorded a weekly loss of more than 3%, and in addition to its decrease since the beginning of the year 2023 until its date by more than 5%.
The main story at the end of the week is the US employment situation, which triggered a sell-off in global financial markets amid expectations that this would lead to the Federal Reserve maintaining its quantitative easing (QT) campaign. According to the Bureau of Labor Statistics (BLS), the US economy added a staggering 517,000 new jobs in January, up from the upwardly revised figure of 260,000 in December. This was also much greater than economists' expectations of 185,000.
The US unemployment rate also fell to 3.4%, down from 3.5% the previous month and below market estimates of 3.6%. The labor force participation rate rose to 62.4% from 62.3%. It was also announced that the average hourly income slowed to 4.4% on an annual basis, the average hourly income increased 0.3% on a monthly basis, and the average weekly hours increased to 34.7. Employment gains were broad-based, led by entertainment and hospitality (128,000), professional and business services (82,000), health care (58,000), and government (74,000).
Among other economic data, the US services PMI rose to a reading of 46.8 and 46.8, respectively, slightly higher than market estimates - a reading below the 50 level indicates contraction. The Institute for Supply Management's (ISM) non-manufacturing purchasing managers' index (PMI) advanced to a reading of 55.2 in January, up from a reading of 49.2. This exceeded economists' expectations at 50.4. Employment, new orders, and business activity increased, but prices were relatively unchanged and higher than expected.
While the U.S. central bank is expected to continue raising interest rates by a quarter point over the next two meetings, investors have been betting that the Fed will cut interest rates later this year in response to slowing economic conditions. However, with a resilient labor market defying all expectations and norms, investors were at a loss.
The gold market is generally considered sensitive to interest rates because it can affect the opportunity cost of holding the bullion that does not yield a return.
The US dollar index (DXY), which measures the performance of the US currency against a basket of other major currencies, rose to 102.40 from opening at 101.75. Accordingly, the index has now moved to achieve a weekly gain of about 0.5%. A stronger profit for the dollar is a bad thing for dollar-denominated goods because it makes it more expensive for foreign investors to buy.
For the other metals markets, copper futures rose to $4.101 per pound. Platinum futures fell to $1003.00 per ounce. Palladium futures fell to $1611.00 an ounce.
Technical analysis of gold prices XAU/USD:
In the near term and according to the performance on the hourly chart, it seems that the gold price XAU / USD is trading within the formation of a sharp downward channel. This indicates a strong short-term bearish bias in market sentiment. Therefore, the bears will target extended bearish profits at around $1855 or lower at the $1843/oz support. On the other hand, the bulls will look to pounce on profits at around the $1875 resistance or higher at the $1886 resistance per ounce.
In the long term and according to the performance on the daily chart, it seems that the price of the yellow metal XAU/USD has completed a downward breakout to form an ascending channel. This indicates a sudden change in market sentiment from bullish to bearish. Therefore, bearish speculators will target an extended drop at around $1830 per ounce or lower at $1792 per ounce. On the other hand, the bulls will target the long-term profits at around $1907 or higher at the resistance $1949 per ounce.
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