Weekly technical and fundamental analysis of Gold – March 3nd

As you are aware, the global price of gold, after trading in a small range during the first half of the past working week, managed to reach its highest level since early February, above $2050, on the last working day.

The short-term technical outlook for gold seems hopeful for market bulls. However, remember that investors are likely to disregard technical signs next week during the release of important US economic news.

Events of the past week in the gold market:

At the beginning of the past working week, due to the lack of significant economic news, global gold could not make significant moves and fluctuated in a small range between $2025 and $2039.

Then came Tuesday, the day the market awaited the report on US durable goods orders.

According to the latest reports, US durable goods orders decreased by 6.1% monthly, which failed to create a significant reaction in the market.

Traders were then waiting for the important news of US Gross Domestic Product (GDP) which was scheduled to be released on Thursday.
As you are aware, the US has three types of GDP reports: preliminary reading, revised reading, and final GDP.

On Wednesday, the Bureau of Economic Analysis (BEA) announced that the annual growth of Gross Domestic Product (GDP) had been revised from 3.3% in the preliminary estimate to 3.2%.

Due to the 0.1% decrease in GDP compared to the initial estimate, the US dollar came under selling pressure, allowing gold to rise to around $2037.

Then on Thursday, the global price of gold gathered momentum and managed to increase to the important level of $2050. It is worth mentioning that this was the highest price for gold in the past month.

Finally, on Friday, the market awaited the release of the US Personal Consumption Expenditures (PCE) inflation gauge report, which is actually the Federal Reserve’s favorite indicator.

According to the BEA report, inflation in the US, measured by changes in the Personal Consumption Expenditures (PCE) price index, had decreased to 2.4% in January.

This figure followed a 2.6% increase recorded in December and was in line with market expectations.

After the release of this report, the yield on US 10-year Treasury bonds dropped to 4.3%, causing global gold to reach its highest level in the past two months at around $2090 at the end of the last working day.

However, cautious statements from Federal Reserve officials about the outlook for US central bank policies helped the dollar maintain its position and limited gold’s rise as the week came to a close.

For example, Raphael Bostic, President of the Atlanta Federal Reserve, suggested that starting interest rate cuts in the summer might be appropriate.

Mary Daly, President of the San Francisco Federal Reserve, argued that a rapid reduction in interest rates could lead to inflation sticking, and finally Loretta Mester, President of the Cleveland Federal Reserve, also said that she and her colleagues could not expect inflation to continue to decline like last year.

In any case, global gold took the most impact from the PCE inflation data and the drop in the 10-year Treasury bond yield and managed to push itself up to around $2090 before entering the New Year holidays.

Events in the Forex and gold market next week:

Next week, important economic and fundamental news from the US will begin with the ISM Services Purchasing Managers’ Index (PMI).

It is predicted that the PMI for February in the US will remain above the important 50 mark, indicating continued expansion in business activities in the US services sector.

If you recall, in January, an important component of the PMI survey, the Price Paid Index, jumped from 56.7 to 64, indicating an increase in inflation in input costs.

Keep in mind that whenever the ISM Institute’s PMI report is due to be released, you should focus on this inflation component of the survey.

If once again in Tuesday’s report we see growth in the inflation component, the US dollar will strengthen again and global gold will start to decline.

On Wednesday, the market is expected to observe two important employment-related news from the United States, namely the ADP Jobs Change and JOLTS Job Openings for February. These two reports are the first employment-related data of the upcoming week before the important NFP report on Friday.

In January, private sector wages and salaries increased by 107,000. Remember that any reading below 100,000 in the ADP Jobs Change report can have a negative impact on the dollar as it indicates weak conditions in the US labor market.

Regarding the second report, the JOLTS Job Openings news, consider that the number of job opportunities has fluctuated around 9 million since October.

It is unlikely that traders will react to the results of this report before the most important news of next week, namely the NFP report, unless the announced figures surprise everyone regardless of direction.

Finally, on Friday of next week, the entire market awaits the important US jobs report, or NFP.

If you remember, the January NFP report surprisingly increased by 353,000. The result of this report led the Federal Reserve authorities to once again postpone their interest rate cuts.

In fact, two very strong reports – Consumer Price Index (CPI) and Producer Price Index (PPI) along with very strong employment data (NFP) – have convinced investors that interest rates will remain higher for a longer period than expected by central bank officials in America.

In fact, based on the famous CME Group tools, the likelihood of the Federal Reserve reducing interest rates in May is currently 25%, and the decrease in interest rates from June is 75% (meaning that the Federal Reserve will not change its rates in March and May).

If for any reason the NFP report shows a decrease close to 150,000, the US dollar will face selling pressure from market bears. The reason for this is that traders will start speculating that the Federal Reserve will reduce its rates from May.

If for any reason the NFP report is close to 200,000, this indicates that the US labor market is strong enough and Federal Reserve officials can comfortably refrain from raising interest rates until the July meeting. In this scenario, the US dollar, which still has plenty of room for further gains, will start to rise.

Also, remember that Jerome Powell, the head of the Federal Reserve, is scheduled to present his six-month monetary policy report next week. Powell will testify before the House Financial Services Committee and the Senate Banking, Housing, and Urban Affairs Committee on Wednesday and Thursday .

Weekly Technical Analysis of Gold:

The price floor and ceiling of gold in the past week were $2024 and $2088. If you open the daily gold chart right now and plot an RSI indicator, you will see that the indicator’s peak is pointing upwards and showing a value of 70. This means that currently market bulls are in control, and the important 50-day moving average, which has been acting as a significant support level for several months and had pushed gold prices higher, has now shifted below the current gold price.

If gold can consolidate above this important support level next week, we can expect the global ounce trend to remain bullish in the daily timeframe. From a technical perspective, this 50-day moving average had played a great supportive role for global gold for several months.

Overall look at the global ounce of gold:

Key support levels in the analysis of global gold:

If gold were to decline, the first significant support level would be the important $2080 area. If gold penetrates below this area, the next important price level is $2060. If market bears push gold lower, the next important levels would be $2050 and $2040.

Key resistance levels in the analysis of global gold ounce:

If gold were to increase, the first important resistance level would be $2090. If gold successfully surpasses this area, the next important level would be $2100. If market bulls manage to push gold higher, the next resistance levels would be $2120 and $2150.

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Happy trading
may the pips be ever in your favor!