Gold price impacted by strong US jobs numbers, rate hikes; wait for further data to go long with Rs 55,800 target

By Bhavik Patel

Gold market was on its way to touch $1900 on Wednesday before Fed’s minutes were published which confirmed their commitment to bringing down inflation and warned against unwarranted loosening of financial conditions. The rallies in the gold and silver markets this week also came amid worries about rising Covid infections in China continuing to crimp the world’s second-largest economy. In the minutes, officials noted that a slower pace of rate hikes does not mean an easing of financial conditions. Another highlight was the minutes stating that no participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023. Next big trigger for gold is today’s US employment number.

Gold saw more losses on Thursday and largely was in reaction to private payrolls data coming better than expected. The economy is clearly weakening, but the labor market refuses to break and strong ADP data could be precursor of strong Friday’s payroll data. If today’s data came stronger than expected, then we can expect more downside in gold. Until the labor market starts showing concrete signs of a slowdown, the $1,900 an ounce level will remain out of reach for the gold market.

Also Read

Supreme Court refuses urgent listing of plea challenging Rs 2,000 banknote exchange without ID proof

Wrestlers’ protest: Disquiet within BJP, Haryana leaders fear silence could hurt party in polls

Why do wrestlers want to throw away medals in the MeToo protest? Know all the details

Breaking news: GST collections rise 12 % to Rs 1.57 lakh crore in May | Foxconn to make iPhones in India’s Karnataka by next April

Gold has been falling since the Fed started increasing its rate in March and after that had made a series of lower top and lower bottom. After making a triple bottom in October and November, in December, gold made its first higher high and higher low. We can say sentiment has changed since November when the initial rally was on back of short covering but then fresh longs started accumulating which gave way to rally from $1680 to $1850.

Gold price saw a ‘Bearish Engulfing’ pattern at the top end of the range indicating signs of trend reversal. Trend right now is clearly bullish but looking at the bearish engulfing candle on a daily scale, it is prudent to take profit off the table and wait for correction before taking further fresh positions. 54,750 is the immediate support and level where one can initiate a long position as that level also coincides with the 20-day moving average. On the upside, the target of 56,250 still remains open as long as 54,450 is not breached on the downside. With today’s non-farm payroll data coming up, we would advise traders to wait for the data to publish and if gold comes in range of 54,700-54,600, one can go long with a target of 55,800 and stoploss of 54,300.

(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)