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The Gold market awaits US employment report

6 October 2021

The Gold market traded higher in the previous daily sessions and managed to close the previous week in positive territory. Gold traders have an interesting week ahead with a solid economic calendar possibly providing numerous opportunities for placing orders. This report will overview some of the most important fundamentals relating to Gold’s price currently, while we will also look into some events coming up in the next days. Our closing will consist of Gold’s technical analysis, providing levels and trend lines.

We start our analysis with the USD which moves contrary to Gold’s price. The power of the greenback was emphasized in the previous week with the Dollar Index reaching a new 2021 high level dragging most of its counterparts including Gold’s price lower. Even though the greenback corrected lower during the closing of the previous week we could say that technically it has displayed significant strength and that this momentum may be sustained in the short term.

We base this opinion on the fact that some important economic data in the US, seem improved and have even prompted some FOMC members to be asking for a change in monetary policy. For example the final GDP rate for Q2 was lifted higher from previous 6.6% to 6.7% while the ISM Manufacturing figure was higher than expected reaching 61.1. Manufacturing was a sector that most analysts were particularly focusing on, due to worries that the ongoing supply disruptions matter may have impacted the sector. The indicator however proved the sector stood strong in September. On the other hand, the weekly initial jobless claims figure was higher than previous weeks and traders will be anticipating this week’s release to make comparisons. In the current week traders will be focusing on the US employment report that will be coming up on Friday with the Non-Farm payrolls, the Unemployment rate and the Average Earnings rates to be released. This event can be a great market mover and Gold’s price specifically could come under immense volatility. Caution is advised as the strong price action can prevail before, during and after the release of the figures.

On a separate note the US Sino trade war is back in the epicenter of the market. In the most recent developments a report by the Financial Times found Chinese media criticizing US President Joe Biden over his approach to the trade matter. In the report it was noted that Joe Biden was seen to continue tactics used by Donald Trump and his “America First” policy.

This deal would include an increase in US product purchases by the Chinese and even a reduction in Chinese tariffs on imports from the US. Even though the global economy is still recovering from the pandemic, a trade dispute can slow down recovery substantially. We would suggest traders keep an eye on this matter as the U.S.-China trade ties are fragile at the moment. China is also dealing with a number of other internal issues at the moment that pose global economic threats. First its energy crunch seems to be holding factories from producing with limited hours of operation while the debt problem affecting China’s real estate market hasn’t really been dealt with to fully estimate its significance.

On a final note, from our perspective Gold prices could also be influenced by other markets that are currently on the rise. A number of agriculture and energy commodities are seeing their prices rise to multiyear high levels currently. Since many businesses depend on these commodities to carry out their own products, with the overall market becoming rather expensive, economic risk could be increasing considerably, possibly leading to negative effects with some companies going bust in the medium term.

XAU/USD H4 timeframe

Gold at the moment is trading nearby 1757 just between the (R1) 1770 resistance and the (S1) 1740 support.  However, in the past weeks Gold has been moving in an even wider range between the (R2) 1790 and the (S2) 1722 using them both as the highest and lowest levels attempted. Our highest level for this report is the (R3) 1810 that was tested for the last time on the 14th of September while our final support stands at the (S3) 1705. Even after the recent move upwards observed in the past days we tend to keep a sideways motion with bearish tendencies as our personal view for gold’s price. For us to switch to a buying momentum we would have to see a clear breach above the (R2) 1790 level with the price action stabilizing even higher. The RSI indicator below our chart seems to display a bullish interest after the recent upward trend yet its stabilization nearby 50 may imply traders are more interested in a sideways motion.


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