The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, are known collectively as OPEC+ and will meet on Sunday, June 2, to discuss their joint oil production policy. However, analysts are not particularly bullish on crude oil prices this year as many believe markets to be oversupplied with OPEC decisions hardly making a difference towards ‘price stability’.
OPEC+ has made a series of cuts since late 2022 amid rising output from the United States and other non-members, and worries over the demand outlook as major economies grapple with high interest rates to tame inflation. The oil-producing group is working on a complex deal to be agreed on Sunday that will allow the group to extend some of its deep oil production cuts into 2025. Also Read:Built-in capacity to targets: Why OPEC+ members clash over oil production capacity—Explained
The group is currently cutting output by a total of 5.86 million barrels per day (bpd), equal to about 5.7 per cent of global demand. The cuts include 3.66 million bpd by OPEC+ members valid through to the end of 2024, and 2.2 million bpd of voluntary cuts by some members which expire at the end of June.
Despite deep production cuts Brent crude prices are trading near their lowest this year at $81 per barrel, down from a peak of $91 in April, pressured by elevated stocks and concerns over the global demand growth.
The Paris-based watchdog International Energy Agency (IEA) had lowered its forecast for 2024 oil demand growth, widening the gap with OPEC+ in terms of expectations for this year’s global oil demand outlook. The divide between the IEA and OPEC sends divergent signals about the oil market strength in 2024, according to analysts.
The gap between the IEA and OPEC is now even wider than it was earlier this year, when an analysis by news agency Reuters found that the difference of 1.03 million barrels per day (bpd) in February was the biggest since at least 2008.
Ahead of Sunday’s OPEC+ policy meeting, crude oil prices dropped in the previous session and posted a weekly loss as investors awaited the verdict. Brent futures for July delivery settled lower at $81.62 a barrel, while the US West Texas Intermediate (WTI) crude futures fell 1.2 per cent at $76.99. Also Read:IEA vs OPEC: IEA widens gap with OPEC on crude oil demand projections for 2024; June policy decision eyed
Several brokerages are predicting that crude oil is likely to remain in the range of $79-$85 till the second quarter of 2024. JP Morgan anticipates Brent crude price to average $84 per barrel in 2024 and $75 per barrel in 2025. Kaynat Chainwala, AVP-Commodity Research of Kotak Securities in an interview to Mint’s Nikita Prasad, said that OPEC is likely to extend the output cuts till the second half of this year to support prices. The analyst expects crude oil prices in the range of $70-$90 per barrel in 2024 and added that oil has almost given up the geopolitical risk premium over the Middle East conflicts.
Edited excerpts from the interview:
1. The upcoming OPEC and non-OPEC ministerial meeting will be held on June 2, 2024. According to you, what will OPEC+ decide in terms of the global oil output? After the policy decision, what kind of immediate impact do you see on crude oil prices?
OPEC is expected to extend the output cuts into 2H 2024 in an effort to stave off a surplus and support crude prices already contending with fragile Chinese economic outlook and rising non-OPEC supplies. The shift to a virtual meeting indicated that there might be no major policy changes. Markets have already discounted such an outcome and thus don’t see any major impact on prices post the policy.
2. OPEC cartel last extended the voluntary oil output cuts of 2.2 million bpd till mid-2024 to support ‘market stability’. However, oil prices have remained in a consolidation range, with $91/barrel being the highest achieved mark since then. Do you see crude oil prices on an up move in the near term through the Middle East geopolitical risk premium?
Oil prices have given up most of the middle east geo-political risk premium seen in April amid lack of supply disruptions, other than isolated events at the Red sea. Without the disruption of actual barrels of oil, any gains might be capped. The odds of a direct conflict between Iran and Israel or US is also very minimal ahead of the US presidential election in November.
3. Coming to policy changes, high interest rates by central banks have typically weakened oil demand. However, the recent hawkish remarks by the US Federal Reserve policymakers have diminished hopes of early rate cut. With the ongoing geopolitical conflicts, do you think the global supply will be enough for markets if global demand shoots up in late 2024?
Elevated inflation in US and resilience in the economy have prompted Fed officials to be more hawkish this quarter and swaps are now expecting only a single quarter point rate cut this year, during Q4. EIA expects global oil demand to slightly outpace supply this year, leading to a small deficit of around 100 kbpd. Q4 is generally a period of lower demand. Chinese economic recovery will be crucial for oil demand.
4. Finally, what is your 2024 outlook for crude oil prices and how many times will OPEC likely extend the supply curbs this year? When do you see Brent touching $100 per barrel?
OPEC is likely to extend the curbs through the second half of this year and might start unwinding from early 2025. Crude is expected to trade in a range of $70 – $90 per bbl this year, with OPEC keeping a floor under prices. Even though oil demand is expected to see an uptick from June amid the onset of summer driving season in northern hemisphere, we are not expecting any sustained increase in prices above $100 per bbl, amid higher interest rates, Chinese economic uncertainty and US elections.
OPEC+ crude output represents about 41 per cent of global oil production. The group’s main objective is to regulate the supply of oil to the global market. The leaders are Saudi Arabia and Russia, which produce and nine million and 9.3 million bpd of oil respectively. Angola, which joined OPEC in 2007, quit the bloc at the start of this year, citing disagreements over production levels. Ecuador quit OPEC in 2020 and Qatar in 2019.
OPEC says its member states’ exports account for about 49 per cent of global crude exports. OPEC estimates that its member countries hold about 80 per cent of the world’s proven oil reserves. Because of its large market share, the decisions OPEC makes can affect global oil prices. OPEC+ members meet regularly to decide how much oil to sell on global markets. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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An upside breakout of the pennant is indicated on a decisive rally above yesterday’s high of 2.83. Once the recent trend high of 2.92 is broken to the upside, a bullish breakout of the declining trend channel will also occur. If that happens, the prior swing high of 3.39 becomes the next higher target, followed by the 2023 peak at 3.64. Higher up is the target derived from the measuring objective of the pennant pattern. Its target is 3.78.
Strong Bullish Position
The pennant pattern is in an interesting position, holding support of the 20-Day and 200-Day MAs, while further testing resistance at the top trendline. It has the potential to lead to an explosive rally in natural gas. The pullback from the recent trend high has been minor, not even reaching the 38.2% Fibonacci retracement.
This is a sign of strength as buyers could have been waiting for lower prices to get more aggressive. As the price of natural gas consolidates within the pennant pattern it is building up energy for the next swing. The 0.95-point rally prior to the consolidation left a clue as to what may come next. Typically, a bull flag has the potential to match or exceed the rally prior to the consolidation pattern occurring.
Lower Support Levels
On the downside, maintaining support above the 20-Day MA, currently at 2.545, is key to the current environment. The 20-Day MA showed strength recently as it rose above the 200-Day line recently after being below it since February 2. Notice that the 20-Day line is close to converging with the bottom boundary line of the pennant pattern. Following lower interim support levels being tested, natural would likely be headed towards an eventual test of support around 2.25 to 2.23. That first level is the 50% retracement.
Gold price stages a decent bounce toward $2,340 early Wednesday amid a better mood.
The US Dollar stabilizes with US Treasury bond yields, in the aftermath of weak US JOLTS data.
Gold price yielded a range breakdown below the 50-day SMA on Tuesday while the RSI turned bearish.
Gold price is attempting a tepid rebound toward $2,340 early Wednesday, having tested the three-week low of $2,315 a day ago. Attention turns toward the top-tier US ADP jobs and ISM Services PMI data for fresh cues on the US Federal Reserve (Fed) interest rate outlook, which will likely significantly impact the non-interest-bearing Gold price.
Gold price awaits more high-impact US data
Gold price finds its feet in Asian trading on Wednesday, as the US Dollar loses its recovery momentum, as risk sentiment improves after upbeat China’s Caixin Services PMI data. China’s S&P Global Caixin Services PMI jumped to 54.0 in May from a 52.5 figure seen in April, beating the market forecast of 52.6.
Encouraging China’s manufacturing and services activity data points to improving economic performance in the world’s top Gold consumer. Additionally, Gold buyers stay hopeful ahead of the ADP private sector Employment Change data and the ISM Services PMI, especially after the recent couple of soft US economic releases revived expectations for a September Fed rate cut.
Job openings, a measure of labor demand, were down 296,000 to 8.059 million on the last day of April, the lowest level since February 2021, the Labor Department’s Bureau of Labor Statistics (BLS) said on Tuesday in its JOLTS survey.
Data released by the ISM showed on Monday, the Manufacturing PMI index dropped from 49.2 in April to 48.7 in May, missing the expected 49.6 print. The ISM Manufacturing Prices Paid eased to 57.0 in May vs. 60.9 previous and 60.0 expected.
Markets are currently pricing in about a 56% chance of a 25 basis points (bps) Fed rate cut in September, against a 52% probability of such a reduction seen Monday, CME Group’s FedWatch tool shows.
Renewed dovish Fed expectations could continue to undermine the US Dollar and revive the bullish sentiment around Gold price should the US ADP jobs and ISM Services PMI data disappoint markets later on Wednesday.
Gold price technical analysis: Daily chart
As observed on the daily chart, the Gold price yielded a range breakout by closing Tuesday beneath the key 50-day Simple Moving Average (SMA) support, which was then at $2,335.
The 14-day Relative Strength Index (RSI) has returned to negative territory below the 50 level, justifying the downside break.
Gold sellers need a sustained move below the three-week low of $2,315 to extend the downtrend toward the $2,300 level.
Further south, a drop toward the May 3 low of $2,277 will be on the cards.
Alternatively, any recovery in Gold price will need acceptance above the 50-day SMA support-turned-resistance, now at $2,337 to take on the stiff 21-day SMA at $2,358.
Further up, Gold buyers could flex their muscles toward the May 24 high of $2,364, above which Gold price could see a run toward the rising wedge support-turned-resistance at $2,400.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Gold price stages a decent bounce toward $2,340 early Wednesday amid a better mood.
The US Dollar stabilizes with US Treasury bond yields, in the aftermath of weak US JOLTS data.
Gold price yielded a range breakdown below the 50-day SMA on Tuesday while the RSI turned bearish.
Gold price is attempting a tepid rebound toward $2,340 early Wednesday, having tested the three-week low of $2,315 a day ago. Attention turns toward the top-tier US ADP jobs and ISM Services PMI data for fresh cues on the US Federal Reserve (Fed) interest rate outlook, which will likely significantly impact the non-interest-bearing Gold price.
Gold price awaits more high-impact US data
Gold price finds its feet in Asian trading on Wednesday, as the US Dollar loses its recovery momentum, as risk sentiment improves after upbeat China’s Caixin Services PMI data. China’s S&P Global Caixin Services PMI jumped to 54.0 in May from a 52.5 figure seen in April, beating the market forecast of 52.6.
Encouraging China’s manufacturing and services activity data points to improving economic performance in the world’s top Gold consumer. Additionally, Gold buyers stay hopeful ahead of the ADP private sector Employment Change data and the ISM Services PMI, especially after the recent couple of soft US economic releases revived expectations for a September Fed rate cut.
Job openings, a measure of labor demand, were down 296,000 to 8.059 million on the last day of April, the lowest level since February 2021, the Labor Department’s Bureau of Labor Statistics (BLS) said on Tuesday in its JOLTS survey.
Data released by the ISM showed on Monday, the Manufacturing PMI index dropped from 49.2 in April to 48.7 in May, missing the expected 49.6 print. The ISM Manufacturing Prices Paid eased to 57.0 in May vs. 60.9 previous and 60.0 expected.
Markets are currently pricing in about a 56% chance of a 25 basis points (bps) Fed rate cut in September, against a 52% probability of such a reduction seen Monday, CME Group’s FedWatch tool shows.
Renewed dovish Fed expectations could continue to undermine the US Dollar and revive the bullish sentiment around Gold price should the US ADP jobs and ISM Services PMI data disappoint markets later on Wednesday.
Gold price technical analysis: Daily chart
As observed on the daily chart, the Gold price yielded a range breakout by closing Tuesday beneath the key 50-day Simple Moving Average (SMA) support, which was then at $2,335.
The 14-day Relative Strength Index (RSI) has returned to negative territory below the 50 level, justifying the downside break.
Gold sellers need a sustained move below the three-week low of $2,315 to extend the downtrend toward the $2,300 level.
Further south, a drop toward the May 3 low of $2,277 will be on the cards.
Alternatively, any recovery in Gold price will need acceptance above the 50-day SMA support-turned-resistance, now at $2,337 to take on the stiff 21-day SMA at $2,358.
Further up, Gold buyers could flex their muscles toward the May 24 high of $2,364, above which Gold price could see a run toward the rising wedge support-turned-resistance at $2,400.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Silver price edges higher due to the growing expectations of the Fed implementing a rate cut in September.
CME FedWatch Tool indicates the Fed rate cut odds by at least 25 basis points has risen to nearly 64.9%.
Any failure to secure a peace agreement between Israel and Hamas could bolster the safe-haven Silver.
Silver price rebounds from a three-week low of $29.38 recorded on Tuesday, now trading around $29.60 per troy ounce during the European session on Wednesday. This upward correction in Silver prices is likely due to increasing speculation that the Federal Reserve (Fed) will begin reducing interest rates starting from the September meeting, following a series of weak US economic data.
On Tuesday, the JOLTS US Job Openings declined by 296,000 to 8.059 million in April, down from March’s 8.355 million, marking the lowest level since February 2021. This figure also missed the market consensus of 8.340 million.
As per the CME FedWatch Tool, the probability of a Fed rate cut by at least 25 basis points has increased to nearly 64.9%, up from 46.3% a week earlier. Investors await the key US data releases later on Wednesday, including the US ADP Employment Change and ISM Services PMI reports.
On Tuesday in the Middle East, Osama Hamdan, a Hamas official, stated in a televised press conference, as reported by Reuters, that Hamas cannot agree to any deal unless Israel makes a “clear” commitment to a permanent ceasefire and a full withdrawal from the Gaza Strip.
Qatar, mediating talks between Hamas and Israel, has also urged Israel to provide a clear position backed by its entire government to help reach a deal. A failure to secure a peace agreement could increase the value of safe-haven assets like Silver.
Bottom of Large Triangle Consolidation May Offer Support
The lower uptrend line will soon converge with the 78.6% retracement level presenting a more formidable potential support zone. Also, monthly support (daily swing low) from February was 71.38. It can be combined with the other price levels mentioned above to generate a larger support zone from 72.12 to 71.38. Notice that February’s swing low began an accelerated rally that peaked at 87.89 in April. Maybe a test of the February support zone will complete a round trip and set the stage for the next advance. However, a decline below 71.38 followed by further weakness will trigger a breakdown from the symmetrical triangle consolidation pattern.
Moving averages are showing turning bearish. Recently, the short-term 20-Day MA fell back below the 200-Day MA, and it continues to point down. The 50-Day MA has also begun to turn down. If it crosses below the 200-Day line, another bearish signal will be generated.
Rise Above Today’s High Will Show Strength, But Sustainability Questionable
On the upside, it wouldn’t be a bad idea to allow for a day or a few to occur to see how the market in crude develops. There are no current signs that a spike bullish reversal may be coming soon. An advance above today’s high of 74.39 will provide the next sign of strength. But, given the potential for a test of support at the bottom of the triangle and the lack of buying signs so far, it may not be sustainable just yet.
For a look at all of today’s economic events, check out our economic calendar.
United States job openings contracted by more than anticipated in April.
Treasury yields edged further lower while US indexes also shed ground.
XAU/USD could accelerate its slide once below $2,314.63, the weekly low.
Demand for the US Dollar returned on Tuesday, with risk-off flows moving away from Gold. XAU/USD trades around $2,325, down for the day. Tepid United States (US) growth-related data undermined demand for the American currency on Monday, pushing the pair towards a weekly high of $2.354.60, but speculative interest gave up as the mood deteriorated further early in Asia, extending after Wall Street’s opening.
The US published the first of several employment figures ahead of the monthly Nonfarm Payrolls (NFP) report scheduled for Friday. According to the Bureau of Labor Statistics (BLS), the Job Openings and Labor Turnover Survey (JOLTS) showed the number of job openings on the last business day of April stood at 8.059 million, easing from a previously revised 8.35 million and missing expectations of 8.34 million. The Greenback initially fell with the news but quickly changed course as the US also published an upbeat Factory Orders figure, up 0.7% in April vs the 0.6% anticipated by market participants.
Government bonds surged, sending yields even lower from their recent peaks, although stock markets are unable to lift their heads. The three major US indexes trade in the red, albeit losses are modest.
XAU/USD short-term technical outlook
From a technical point of view, XAU/USD is poised to extend its slide. The daily chart shows it retreated from near a mildly bullish 20 Simple Moving Average (SMA) for the fourth consecutive day. Furthermore, technical indicators extended their slides within negative territory, maintaining their firmly downward slopes. Finally, it is worth mentioning that the 100 and 200 SMA retain their bullish slopes far below the current level, limiting the bearish potential in the long term.
In the near term, and according to the 4-hour chart, the bearish case is even clearer. XAU/USD has fallen below all its moving averages, which anyway remain directionless. Furthermore, a pullback was contained by the 20 SMA, currently at around 2,339.10. At the same time, technical indicators head firmly lower well below their midlines, in line with another leg south should the pair break below the weekly low at 2,314.63
Support levels: 2,314.60 2,305.30 2,289.70
Resistance levels: 2,339.10 2,355.50 2,364.00
XAU/USD Current price: $2,325.17
United States job openings contracted by more than anticipated in April.
Treasury yields edged further lower while US indexes also shed ground.
XAU/USD could accelerate its slide once below $2,314.63, the weekly low.
Demand for the US Dollar returned on Tuesday, with risk-off flows moving away from Gold. XAU/USD trades around $2,325, down for the day. Tepid United States (US) growth-related data undermined demand for the American currency on Monday, pushing the pair towards a weekly high of $2.354.60, but speculative interest gave up as the mood deteriorated further early in Asia, extending after Wall Street’s opening.
The US published the first of several employment figures ahead of the monthly Nonfarm Payrolls (NFP) report scheduled for Friday. According to the Bureau of Labor Statistics (BLS), the Job Openings and Labor Turnover Survey (JOLTS) showed the number of job openings on the last business day of April stood at 8.059 million, easing from a previously revised 8.35 million and missing expectations of 8.34 million. The Greenback initially fell with the news but quickly changed course as the US also published an upbeat Factory Orders figure, up 0.7% in April vs the 0.6% anticipated by market participants.
Government bonds surged, sending yields even lower from their recent peaks, although stock markets are unable to lift their heads. The three major US indexes trade in the red, albeit losses are modest.
XAU/USD short-term technical outlook
From a technical point of view, XAU/USD is poised to extend its slide. The daily chart shows it retreated from near a mildly bullish 20 Simple Moving Average (SMA) for the fourth consecutive day. Furthermore, technical indicators extended their slides within negative territory, maintaining their firmly downward slopes. Finally, it is worth mentioning that the 100 and 200 SMA retain their bullish slopes far below the current level, limiting the bearish potential in the long term.
In the near term, and according to the 4-hour chart, the bearish case is even clearer. XAU/USD has fallen below all its moving averages, which anyway remain directionless. Furthermore, a pullback was contained by the 20 SMA, currently at around 2,339.10. At the same time, technical indicators head firmly lower well below their midlines, in line with another leg south should the pair break below the weekly low at 2,314.63
The US dollar has found its footing after a period of weakness, currently hovering around 104.30 on the Dollar Index (DXY). This resurgence makes silver more expensive for foreign buyers, potentially reducing demand and exerting downward pressure on prices.
US Jobs Data: Pivotal Moment for Silver
This week’s US jobs data release is a critical event for silver investors. The ADP employment report on Wednesday and the non-farm payrolls data on Friday will offer crucial insights into the health of the US economy. Strong job numbers could signal a robust economy, potentially deterring the Federal Reserve from cutting interest rates. This scenario would weaken the appeal of silver as a haven asset and could push prices lower. Analysts suggest a non-farm payroll figure exceeding 200,000 could trigger a price decline below the current $28.35 support level.
Geopolitical Tensions and Global Growth: A Counterweight
Despite the headwinds from the US dollar and potential Fed rate hikes, uncertainties surrounding global growth and geopolitical tensions could reignite silver’s safe-haven appeal. Investors seeking to hedge against these risks may return to silver, potentially providing some upside potential.
Near-Term Uncertainty, Technical Support in Play
The near-term outlook for silver is uncertain. While technical factors offer some temporary support at $28.35, the direction hinges on the upcoming US jobs data. Strong data could trigger a price decline, potentially testing the support level. Conversely, weak data could lead to a rebound, especially if it strengthens expectations of Fed rate cuts.
Traders’ Takeaway: Data-Driven Approach is Key
Traders should closely monitor the release of US jobs data and subsequent Fed policy pronouncements. A data-driven approach will be crucial for navigating the near-term volatility in the silver market. By understanding the interplay between the US dollar, economic data, and global uncertainties, traders can position themselves to capitalize on potential opportunities in the silver market.
Gold price rebound fizzles near $2,355 early Tuesday, despite a mixed tone.
The US Dollar recovers with US Treasury bond yields after a weak US ISM PMI-led sell-off.
The daily RSI battles the 50 level, as Gold price readies for a range breakout.
Gold price is facing a modest selling pressure near $2,355 in Asian trading on Tuesday, pausing its solid rebound staged a day ago. Gold price eagerly awaits the US employment data trickling in this week, starting with the JOLTS Job Openings later on Tuesday, for a fresh directional impetus.
Gold price looks to US jobs data for Fed policy cues
On Monday, Gold price defended the critical daily support line and witnessed a solid turnaround in the latter part of the day after the US Dollar was smashed alongside the US Treasury bond yields, following the release of downbeat Institute for Supply Management (ISM) Manufacturing PMI and the Price Paid component.
Data released by the ISM showed on Monday, the main PMI index dropped from 49.2 in April to 48.7 in May, missing the expected 49.6 print. The ISM Manufacturing Prices Paid eased to 57.0 in May vs. 60.9 previous and 60.0 expected.
Weak data revived bets for a September interest rate cut by the US Federal Reserve (Fed). Markets are currently pricing in about a 52% chance of a 25 basis points (bps) Fed rate cut in September, against a 47% probability of such a reduction last Friday, CME Group’s FedWatch tool shows.
In Tuesday’s trading so far, Gold price is struggling to hold its recovery momentum, as the US Dollar attempts a tepid bounce along with the US Treasury bond yields, as the market mood turns cautious ahead of the key US employment data. The US JOLTS Job Opening is likely to show a slight decrease to 8.34 million on the last day of April, as against the previous reading of 8.488 million.
Additionally, the broader market sentiment will also play a pivotal role in the Gold price action, as markets seek Fed policy cues from the upcoming employment data due for release this week. The ADP employment report will be published on Wednesday and Nonfarm Payrolls data will feature on Friday. The data will help gauge the US economic performance, which will have a significant impact on the Fed’s policy action, the value of the US Dollar and the non-interest-bearing Gold price.
Gold price technical analysis: Daily chart
As observed on the daily chart, the Gold price continues to range between the 21-day Simple Moving Average (SMA) and 50-day SMA at $2,357 and $2,334 respectively.
The 14-day Relative Strength Index (RSI) has managed to crawl back above the midline but it seems to be struggling to defend it, at the moment.
If Gold sellers manage to crack the 50-day SMA at $2,334 on a daily closing basis, a test of the $2,300 level will be inevitable.
Further south, a drop toward the May 3 low of $2,277 will be in the offing.
Alternatively, acceptance above the 21-day SMA at $2,357 could put the May 24 high of $2,364 on buyers’ radars.
A sustained move above that level will fuel a run toward the rising wedge support-turned-resistance, then at $2,396.
(This story was corrected on Tuesday at 6:42 GMT to say that ‘In Tuesday’s trading so far’, not Monday’s)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Gold price rebound fizzles near $2,355 early Tuesday, despite a mixed tone.
The US Dollar recovers with US Treasury bond yields after a weak US ISM PMI-led sell-off.
The daily RSI battles the 50 level, as Gold price readies for a range breakout.
Gold price is facing a modest selling pressure near $2,355 in Asian trading on Tuesday, pausing its solid rebound staged a day ago. Gold price eagerly awaits the US employment data trickling in this week, starting with the JOLTS Job Openings later on Tuesday, for a fresh directional impetus.
Gold price looks to US jobs data for Fed policy cues
On Monday, Gold price defended the critical daily support line and witnessed a solid turnaround in the latter part of the day after the US Dollar was smashed alongside the US Treasury bond yields, following the release of downbeat Institute for Supply Management (ISM) Manufacturing PMI and the Price Paid component.
Data released by the ISM showed on Monday, the main PMI index dropped from 49.2 in April to 48.7 in May, missing the expected 49.6 print. The ISM Manufacturing Prices Paid eased to 57.0 in May vs. 60.9 previous and 60.0 expected.
Weak data revived bets for a September interest rate cut by the US Federal Reserve (Fed). Markets are currently pricing in about a 52% chance of a 25 basis points (bps) Fed rate cut in September, against a 47% probability of such a reduction last Friday, CME Group’s FedWatch tool shows.
In Tuesday’s trading so far, Gold price is struggling to hold its recovery momentum, as the US Dollar attempts a tepid bounce along with the US Treasury bond yields, as the market mood turns cautious ahead of the key US employment data. The US JOLTS Job Opening is likely to show a slight decrease to 8.34 million on the last day of April, as against the previous reading of 8.488 million.
Additionally, the broader market sentiment will also play a pivotal role in the Gold price action, as markets seek Fed policy cues from the upcoming employment data due for release this week. The ADP employment report will be published on Wednesday and Nonfarm Payrolls data will feature on Friday. The data will help gauge the US economic performance, which will have a significant impact on the Fed’s policy action, the value of the US Dollar and the non-interest-bearing Gold price.
Gold price technical analysis: Daily chart
As observed on the daily chart, the Gold price continues to range between the 21-day Simple Moving Average (SMA) and 50-day SMA at $2,357 and $2,334 respectively.
The 14-day Relative Strength Index (RSI) has managed to crawl back above the midline but it seems to be struggling to defend it, at the moment.
If Gold sellers manage to crack the 50-day SMA at $2,334 on a daily closing basis, a test of the $2,300 level will be inevitable.
Further south, a drop toward the May 3 low of $2,277 will be in the offing.
Alternatively, acceptance above the 21-day SMA at $2,357 could put the May 24 high of $2,364 on buyers’ radars.
A sustained move above that level will fuel a run toward the rising wedge support-turned-resistance, then at $2,396.
(This story was corrected on Tuesday at 6:42 GMT to say that ‘In Tuesday’s trading so far’, not Monday’s)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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The US Dollar turned south after a dismal ISM Manufacturing PMI.
Investors await for US employment-related data spread throughout the week.
XAU/USD aims higher in the near term, but additional gains still unclear.
Spot Gold started the day on the back foot, shedding some ground amid a better market mood, as reflected by the positive tone of equities. Investors welcomed in-line with expectations United States (US) inflation-related data released last week, as the country reported that the Personal Consumption Expenditures (PCE) Price Index rose 2.7% YoY in April, matching March’s increase and the market expectation, while the monthly advance was slightly lower than anticipated.
XAU/USD changed course mid-European morning, accelerating its recovery after the release of mixed US data. On the one hand, S&P Global upwardly revised the May Manufacturing PMI to 51.3 from a preliminary estimate of 50.9. On the other, the official ISM Manufacturing PMI in the same month posted at 48.7, contracting from the 49.2 posted in April and below the expected 49.6. As a result, the US Dollar fell against all its major rivals, shedding ground alongside Wall Street. At the time being, the three major indexes trade in the red.
Meanwhile, US government bond yields retreat. The 10-year Treasury note currently offers 4.41%, down from an intraday peak of 4.50%, while the 2-year note yields 4.82%, down 7 basis points (bps) for the day.
The US macroeconomic calendar will revolve around employment-related figures. The country will release the JOLTS Job Openings report on Tuesday and the ADP survey on private job creation on Wednesday. Then, the usual weekly unemployment data will precede the monthly Nonfarm Payroll (NFP) report scheduled for Friday.
XAU/USD short-term technical outlook
The daily chart for the XAU/USD pair shows that the bullish potential remains limited despite Gold trading in the green. The pair remains below a flat 20 Simple Moving Average (SMA), while the longer moving averages maintain their upward slopes well below the current level. In the meantime, technical indicators lack directional strength and are still confined to neutral levels.
The 4-hour chart shows the bounce limited the near-term bearish potential, while additional gains do not seem likely. Technical indicators offer firmly bullish slopes but stand within neutral levels, barely overcoming their midlines. At the same time, XAU/USD is meeting sellers around a directionless 200 SMA, while the shorter moving averages also lack directional strength.
Support levels: 2,334.35 2,325.30 2,307.10
Resistance levels: 2,355.50 2,364.00 2,372.90
XAU/USD Current price: $2,346.70
The US Dollar turned south after a dismal ISM Manufacturing PMI.
Investors await for US employment-related data spread throughout the week.
XAU/USD aims higher in the near term, but additional gains still unclear.
Spot Gold started the day on the back foot, shedding some ground amid a better market mood, as reflected by the positive tone of equities. Investors welcomed in-line with expectations United States (US) inflation-related data released last week, as the country reported that the Personal Consumption Expenditures (PCE) Price Index rose 2.7% YoY in April, matching March’s increase and the market expectation, while the monthly advance was slightly lower than anticipated.
XAU/USD changed course mid-European morning, accelerating its recovery after the release of mixed US data. On the one hand, S&P Global upwardly revised the May Manufacturing PMI to 51.3 from a preliminary estimate of 50.9. On the other, the official ISM Manufacturing PMI in the same month posted at 48.7, contracting from the 49.2 posted in April and below the expected 49.6. As a result, the US Dollar fell against all its major rivals, shedding ground alongside Wall Street. At the time being, the three major indexes trade in the red.
Meanwhile, US government bond yields retreat. The 10-year Treasury note currently offers 4.41%, down from an intraday peak of 4.50%, while the 2-year note yields 4.82%, down 7 basis points (bps) for the day.
The US macroeconomic calendar will revolve around employment-related figures. The country will release the JOLTS Job Openings report on Tuesday and the ADP survey on private job creation on Wednesday. Then, the usual weekly unemployment data will precede the monthly Nonfarm Payroll (NFP) report scheduled for Friday.
XAU/USD short-term technical outlook
The daily chart for the XAU/USD pair shows that the bullish potential remains limited despite Gold trading in the green. The pair remains below a flat 20 Simple Moving Average (SMA), while the longer moving averages maintain their upward slopes well below the current level. In the meantime, technical indicators lack directional strength and are still confined to neutral levels.
The 4-hour chart shows the bounce limited the near-term bearish potential, while additional gains do not seem likely. Technical indicators offer firmly bullish slopes but stand within neutral levels, barely overcoming their midlines. At the same time, XAU/USD is meeting sellers around a directionless 200 SMA, while the shorter moving averages also lack directional strength.
