In defiance of persistent US Dollar (USD) strength, gold surged past the $2,200 mark this week. However, with investor attention now turning towards a slew of key macroeconomic data releases from the US scheduled for the coming week, the technical analysis for XAU/USD suggests the potential for a corrective phase before any further upward movement.
Gold Price Momentum in a Shortened Trading Week
After a notable rebound in the latter part of the previous week, the US Dollar Index, which gauges the USD’s performance against a basket of major currencies, began to falter at the start of the week. This downturn facilitated a positive close for XAU/USD on Monday. Despite this, hawkish remarks from Federal Reserve (Fed) officials hindered sustained bullish momentum. Atlanta Fed President Raphael Bostic expressed anticipation of a single policy rate cut by the US central bank within the year, while Fed Governor Lisa Cook highlighted risks associated with premature or excessive policy easing.
On Tuesday, gold climbed to $2,200 during European trading hours but later reversed its gains, buoyed by upbeat US economic data which helped bolster the USD. Notably, Durable Goods Orders in the US rose by 1.4% on a monthly basis in February, following a 6.9% contraction in January.
Lacking significant fundamental catalysts, gold regained momentum, breaching the $2,200 threshold. Despite further USD support stemming from hawkish comments by Fed Governor Christopher Waller later in the week, technical buyers maintained control as long as XAU/USD held above $2,200. Waller emphasized the Fed’s patience regarding policy rate adjustments, suggesting a prolonged restrictive stance may be warranted to ensure sustainable inflation return.
Thursday saw the Bureau of Economic Analysis (BEA) revising fourth-quarter annualized real Gross Domestic Product (GDP) growth to 3.4% from the previous estimate of 3.2%. Additionally, US data revealed 210,000 Initial Jobless Claims for the week ending March 23.
US inflation, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, saw a slight uptick to 2.5% on a yearly basis in February, in line with market expectations. Core PCE Price Index, excluding volatile food and energy prices, rose at an annual pace of 2.8%.
Gold Faces Dual Risks in the Week Ahead
The upcoming week’s US economic calendar features several high-impact data releases, likely to influence market sentiment towards the Fed’s rate outlook and thereby affect XAU/USD dynamics.
Monday will see the release of Manufacturing PMI data for March by the Institute for Supply Management (ISM). A forecasted slight increase in the headline PMI to 48 could potentially bolster the USD upon release. Attention will also be on the Prices Paid Index, the PMI survey’s inflation component, which has remained above 50 in recent months. Any retreat below this level may dampen USD demand despite a better-than-expected PMI reading.
Tuesday’s highlight will be the Bureau of Labor Statistics’ (BLS) release of JOLTS Job Openings data for February, likely to elicit a muted market response barring significant deviation from January figures.
Wednesday’s agenda features the ADP Employment Change and ISM Services PMI data. A disappointing ADP report could dampen USD demand amid concerns about the upcoming official jobs report on Friday. Later in the day, reactions to the Services PMI survey’s Prices Paid Index may mirror Monday’s response.
Friday’s highly anticipated labor market report from the BLS will include Nonfarm Payrolls (NFP) for March, forecasted to increase by 200,000 following February’s 275,000 rise. An unchanged Unemployment Rate at 3.9% and a projected uptick in Average Hourly Earnings by 0.3% on a monthly basis are also expected.
In light of recent USD movements, a stronger-than-forecast NFP accompanied by stable past readings may bolster the USD and exert downward pressure on XAU/USD. Conversely, weaker NFP growth could weaken the USD, potentially strengthening gold.
Market sentiment regarding a potential June rate cut by the Fed stands at around 40%, as per the CME FedWatch Tool. Any indications of tightening labor market conditions in the jobs report could sway investor expectations away from a June rate cut, potentially leading to a corrective phase for XAU/USD. Conversely, if the report suggests a rate reduction remains likely, gold may find renewed bullish momentum.
