Weekly Technical and Fundamental Analysis of Gold – March 10th

After the gold price dropped to around $1980 in February, this is the third consecutive week that the global gold ounce has been rising and has managed to soar to its all-time high of $2195.
The main reason for the rise in the price of gold is the decline in the yield rate of US ten-year Treasury bonds, along with the decrease in the US dollar index in the overall market.

Important note:

It is worth noting that from a technical standpoint, global gold has been in an overbought zone for a few days, especially when important news is expected to be released in the Forex market next week.

Events of the past week in the gold market:

If we look at it on a weekly basis, we must admit that last week, the global gold ounce experienced the highest weekly increase from early February until now (4.63%).

On Friday, February 29th, gold rose to $1950 and eventually ended at a price of $2044. This set the stage for the launch of the global gold ounce at the beginning of last week.

On Monday, gold opened at $2082 and rose to around $2120. This led technical buyers to join this wave and allowed gold to show a good start to its work.

Then came Tuesday, the day when the market awaited the report on the ISM Purchasing Managers’ Index for the United States.

US data on Tuesday showed that the ISM Services PMI decreased from 53.4 in January to 52.6 in February.

While the employment index decreased to 48, indicating a decrease in wages in the services sector, the prices paid index, which is a component of inflation in the ISM survey, also decreased from 64 to 58.6%.

This important factor caused the yield rate of US ten-year Treasury bonds to drop below 4.2%. Consequently, a new wave of dollar selling hit the market immediately, causing gold to continue its upward trend.

Then came Wednesday, the day when the market awaited the swearing-in and presentation of Federal Reserve Chairman Jerome Powell’s six-month monetary policy report in front of members of the Senate Banking Committee and the US banking sector.

In this session, Powell announced that the only thing that will cause him and his colleagues to start lowering interest rates is future economic data.

He emphasized that at the central bank, we are waiting for more evidence of inflation moving towards the Federal Reserve’s 2% target so that we can confidently begin expansionary policies.

Interestingly, when asked about the future economic situation of the United States, he replied: there is no reason to think that the economy is on the brink of a recession or will face a recession in the future.

Powell also hinted at an approximate time for starting the interest rate cuts, but did not completely close the door on interest rate cuts starting from June!

Meanwhile, in the middle of last week with the start of a new risk wave in financial markets, traders again moved towards risky assets. This caused the dollar to start declining and global gold to continue its rally.

Early last Thursday, China, the world’s largest consumer of gold, reported that its trade surplus increased from $75.43 billion in December to $125.16 billion from January to February.

The announced figure exceeded the expected $103.7 billion, causing global gold to rise further in Asian trading sessions.

Then in the second half of the day, the US 10-year yield fell to its weakest level after the US Bureau of Labor Statistics (BLS) cut unit labor costs in the fourth quarter to 0.4% from 0.5% in the initial estimate. In the last month, it reached below 4.1 percent.

Additionally, the U.S. Labor Department reported that there were 217,000 claims for jobless claims (referring to people who received unemployment insurance for the first time) in the week ending March 12, just in line with the previous week’s figure.

In response to these news, gold set a new record for the first time in a while and soared to around $2164 (in fact, Thursday was the seventh consecutive day that gold was in the green).

Finally, Friday arrived; the day when the entire market awaited the important report on US employment or NFP.

Last Friday, BLS reported that non-farm payrolls in the United States increased by 275,000 in February, It’s worth noting that this figure exceeded the economists’ predicted 200,000 but was less than the 353,000 in January!

Other details in this report showed that the unemployment rate increased from 3.7% to 3.9%, while the labor force participation rate remained steady at 62.5%.

The US dollar index also started to decline in response to the NFP news, and global gold once again reached another historical peak at $2195.

Next week’s events in the forex and gold market:

Next Tuesday, the first major piece of news to be released (not gold related, of course) is the UK jobs report.

The most important news of the coming week is the US Consumer Price Index (CPI) report for February, which will be announced on Tuesday

It is expected that both the monthly CPI and core CPI, excluding food and energy, will increase by 0.4% and 0.3% respectively.

Hence, the CPI report for February, which is scheduled to be released next week on Tuesday, is unlikely to change the market position significantly.

The only thing that could change the market’s attitude towards when interest rates start to fall from June to May is the release of a monthly net CPI figure close to zero!

• If this happens, the US dollar will be under strong selling pressure and gold will become extremely strong.
•  Also, note that a strong increase in the core CPI report for February could lead market participants towards a view of no change in interest rates by the Federal Reserve in June, but the initial reaction to this news could cause gold to correct lower.

On Thursday, the United States is set to announce the February retail sales report, and then the Federal Reserve will release data related to industrial production for February on Friday.

Important note:

Meanwhile, as per usual practice before their official March meeting on March 19th and 20th, the Federal Reserve will enter a period of silence known as the blackout period.

In fact, traders will be looking for key technical points to hunt for good trading opportunities after the important inflation report on Tuesday.

The weekly technical analysis of gold:

The floor and ceiling of the gold price last week were 2079 and 2195.

If you open the gold daily chart right now and draw an RSI indicator, you will see that the tip of this indicator is moving upwards in the overbought zone and is showing the number 84.

This indicates that not only is the momentum still in the hands of market bulls, but the price has entered the overbought zone for a while and should start correcting itself at any moment.

If you draw an ascending channel on the daily chart at this time, you will notice that global gold has broken out of the top of this channel!

If you recall, last week we mentioned that if gold could consolidate itself above this important support level in the upcoming week (meaning the week that just passed), we could expect the upward trend of global gold ounce in the daily timeframe to continue, which has happened.

Overall, remember that gold in the week when the important US inflation report is due to be released must first correct a bit and then its path will be determined by the CPI report.

Key support levels in the analysis of global gold ounce:

If gold were to decline, the first significant support level would be the important area of $2160. If gold penetrates below this area, the next key price level is $2150. If market bears push gold lower, the next important levels would be $2140 and $2130.

Key resistance levels in the analysis of global gold ounce:

If gold increases, the first important resistance level would be $2185. If gold successfully crosses this area, the next key level is $2190. If market bulls manage to push the price of gold higher, the next resistance level would be $2200.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.

Happy trading
may the pips be ever in your favor!