Gold (XAU/USD) analysis
Gold prices soar ahead of major US economic indicators
Gold continues to rack up gains over the past two trading sessions, when the precious metal rose just under 3.5%, or $70. Gold prices are not far from the all-time highs hit last December, and the recent rise in volatility has some in the market betting that key metrics will be tested again.
30-day Implied Gold Volatility (GVZ)
Source: TradingView, Author richard snow
While we haven’t seen US yields or indeed the dollar fall enough to warrant such an increase, there is a lot of gold being bought by central banks around the world, and this is ultimately reflected in the paper gold price. There is a possibility. Additionally, the market is increasingly confident that the Fed will cut rates in June, which may be fueling the rally to some extent.
When interest rates fall, the interest-free metal becomes more attractive and the price of gold tends to rise. Of course, the safe-haven appeal of gold should not be ignored as major conflicts in Eastern Europe and the Middle East drag on. However, with major indexes hitting new record highs, stock markets are pointing to positive risk sentiment for the time being, and the extent to which gold’s safe-haven appeal helps support prices has materially diminished. ing.
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Gold’s upside breakout holds despite overbought signals
Gold has broken out of a previous downtrend that saw lower highs and lower lows, during which most of the price movements remained sideways over a long period of time.
$2050 turned out to be an important level and represents a major psychological level that also coincides with trendline resistance. Supported by the 50-day simple moving average, XAU/USD is moving forward with momentum and shows no signs of stopping. Although the RSI has entered significantly overbought territory, gold prices are showing little intention to fall. $2,082 (all-time high) is the next level of support, while a new all-time high of $2,146.80 is noted as resistance.
Gold (XAU/USD) daily chart
Source: TradingView, Author richard snow
Key events/data to watch: US services PMI, Fed testimony, ECB, NFP
While the most influential events and data this week are likely to be non-farm payrolls and the ECB rate-setting meeting, there is a lot that traders should keep an eye on. US services PMI data is due to be released today, with markets wondering whether it signals signs of a slowdown after Friday’s manufacturing report showed some concern. They’ll probably be asking for confirmation. Jerome Powell is scheduled to testify before Congress tomorrow and Thursday, and the ECB is expected to issue an update on monetary policy. On Friday, nonfarm payrolls entered the fray following two very encouraging reports suggesting the job market is thriving.
As a side note, today is also “Super Tuesday,” the day when the majority of states in the United States vote in their presidential primaries.
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— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnow
