Monday, 29 November

Gold struggling to extend 100-DMA


Gold price is posting small gains starting out a big week this Monday, consolidating the previous week’s three-day uptrend, as the US dollar attempts a recovery across the board.

Markets have turned cautious amid Delta covid strain concerns and an unexpected slowdown in the Chinese services sector, lifting the dollar’s safe-haven demand.

However, with the attention turning towards the FOMC minutes and ECB’s special meeting, gold is struggling to extend last week’s advance above the critical 100-Daily Moving Average (DMA), currently at $1790.

On Friday, gold price jumped and briefly recaptured the 100-DMA on a big beat on the US NFP data, which downed the dollar amid ‘sell the fact’.

The precious metal failed to close the day above that level, as the upbeat numbers boosted the Fed’s tapering expectations.

For the start of the week, the price of gold is looking bid and it ended on Friday higher for the third day in a row.

The US dollar was a factor this time around that had otherwise been supported into the Nonfarm Payrolls.

During the mid-week business, the greenback was rising at the same time as gold but this time around gold was propelled forward by a weaker US dollar which snapped 4-days of higher highs.

XAU/USD was ending at $1,787.45  by the close and had travelled between the lows of $1,774.35 and the highs of $1,795.10 following a mixed US Nonfarm Payrolls report for June.

Despite the strong headline number, the dollar failed to move higher even though 850,000 jobs last month had been created after rising 583,000 in May.

There was a focus, however, on the Unemployment Rate which rose to 5.9% from 5.8% in May, while the closely watched average hourly earnings, a gauge of wage inflation, rose 0.3% last month.

The wage component was lower than the consensus forecast for a 0.4% increase and, therefore, traders do not see there being any rush from the Fed to react to inflation at this time.

Profit-taking has ensued ahead of the July 4th holidays but as traders return, price action in the greenback could get interesting. 

Despite a soft dollar on Friday, it posted the week on a positive note, with an 0.5% gain as markets look ahead to the Federal Open Market Committee meetings on July 27-28 and September 21-22, along with the Jackson Hole Symposium August 26-28.

Moreover, gold will likely come under pressure if there is an environment of continuous strong US data over the coming weeks that should lend support to the greenback.

However, for the immediate future, the greenback would be expected to ease off in the wake of Friday’s US jobs report, which markets took a “goldilocks” view of, falling into the hands of the higher beta currencies.