- The XAU/USD is trading above an intraday pivot point level of 1,754, providing a bullish bias for precious metals today
- Gold prices fell on Monday, pulled down by a rising dollar, due to bets that the US Federal Reserve will not delay withdrawing stimulus
- Despite the weak US jobs growth numbers, the expectations of tapering stimulus measures by the Federal Reserve this year were not tempered
The gold prices fell on Monday, pulled down by a rising dollar, due to bets that the US Federal Reserve would not delay withdrawing stimulus, as stagflation predictions restricted the losses in the inflation-hedging bullion. Yesterday, gold closed at $1,753.25, after reaching a high of $1,758.65, and a low of $1,751.20. The yellow metal extended its losses on Monday and dropped for the day, but it only showed minor fluctuations of $7 throughout the entire day.
Gold Slips to $1,758, on the Back of a Stronger Dollar
The US Dollar Index, which measures the greenback’s value against a basket of six major currencies, was high on board, as it moved towards the 94.40 level. This provided additional support to the US dollar, while keeping gold under pressure. The Treasury Yield, on a 10-year note, reached its highest level since May, coming in at 1.62%, and supported the strength of the greenback, which ultimately added to the downward momentum of the yellow metal.
The US market was closed on Monday, due to the Columbus Day bank holiday, which resulted in a thin trading volume in the market, therefore gold remained subdued. On Monday, no macroeconomic data was released from the US side, so market participants kept following the previous trend.
How Does the US Nonfarm Payroll Impact Gold Prices?
On Friday, despite the weak US jobs growth numbers, the expectations of tapering of the stimulus measures by the Federal Reserve this year, were not tempered. Some analysts believe that the labor shortage is causing higher wage pressures, which could exacerbate inflation even more, and that the Fed will eventually have to reduce stimulus measures.
Bullion is viewed as a hedge against inflation and currency depreciation caused by the widespread stimulus. But when the Fed decreases the stimulus, it will diminish the appeal of bullion. Despite a slowing in job gains last month, the market was still moving to the downside, as the Fed’s chances of reducing economic support remained high.
According to Friday’s nonfarm payroll data, 194,000 jobs were created in September, which was below the economists’ forecast of 500,000. Meanwhile, the unemployment rate fell to an 18-month low of 4.8%, and wage gains accelerated.
This pushed the dollar to its highest level in about three years, against the safe-haven currency yen, while the benchmark 10-year Treasury Yield also reached its highest level since late May. This raised the opportunity cost of holding bullion, which pays no interest.
Gold – XAU/USD – Daily Technical Levels
Pivot Point: 1,754.80
- Gold is trading with a neutral bias at the 1,755 level. It holds above an intraday pivot point level of 1,754, providing a bullish bias for precious metals today
- On the higher side, gold is likely to find immediate resistance at 1,764. At the same time, a break-out at the 1,764 level could lead the precious metal prices towards the following resistance levels of 1,773 and 1,779. Furthermore, gold may find immediate support on the bearish side at 1,746. A double bottom pattern extends this support
- Below this pivot point level, the 50-day SMA (simple moving average) provides the next immediate support at 1,751. Let’s consider staying bullish above 1754.80 and bearish below the same level today. Good luck!