XAU/USD: Fed Cuts and End of War to Drive Gold Towards 1890!

After a significant decline on Monday, the price of gold consolidated around $2,020, struggling to recover. Mixed U.S. data affected the yield of the ten-year Treasury, helping limit losses for XAU/USD. On Tuesday, gold saw buying activity following a reversal of $125 from the peak of $2,144-2,145. Despite modest gains, a definitive trend is lacking due to conflicting signals. Federal Reserve Chairman Jerome Powell dismissed speculations of aggressive rate cuts in his Friday speech, but markets seem to anticipate a cut by March 2024. A modest rise in the U.S. dollar hinders gold, but concerns over the Middle East and the global economic outlook maintain a bullish tone as a safe haven. The flight to safety lowers yields on U.S. Treasury bonds, restraining the rise of the dollar and suggesting a likely upward trend for gold. Investors are now awaiting U.S. economic data, including ISM Services PMI and JOLTS Job Openings, focusing on the ADP private employment report and, crucially, Nonfarm Payrolls (NFP) for key insights into the labor market. These releases could influence Federal Reserve policy decisions, impacting demand for gold.

Comment:

Gold recovered towards $2,030 after testing $2,020 earlier in the day. The benchmark 10-year US Treasury bond yield declined to its lowest level in three months, below 4.15%, after US employment data, helping XAU/USD gain momentum. Gold managed to post a daily gain after a sharp decline. The downside risk appears significant, with a break below $2,020 exposing $2,010 and potentially the $2,000 zone. On the upside, a recovery above $2,050 would shift the short-term bias to neutral or positive. Data released in the US on Wednesday included the ADP employment report, which indicated an increase in private payrolls by 103,000, below the market consensus of 130,000. Unit Labor Cost data showed a decline of 1.2% in the third quarter. Despite these figures pointing to a more balanced labor market and less inflationary pressures, the US Dollar remained resilient. Additional US employment data is expected on Thursday, including weekly Jobless Claims, and on Friday, the crucial Nonfarm Payrolls report will be released. While the numbers are expected to show further weakness, the impact on the US Dollar has been limited so far and has not significantly altered the positive momentum. Even the decline in the 10-year Treasury yield to 4.12%, the lowest since early September, has not provided a boost to Gold. The yellow metal remains in a bullish long-term trend but is far from the all-time highs it reached just two days ago.