The European Central Bank trimmed interest rates by 25 bps as expected.
The focus shifts to the May United States Nonfarm Payrolls report.
XAU/USD trades at fresh two-week highs and may extend its advance towards $2,400.
Spot Gold trades with a bullish bias on Thursday, reaching fresh two-week highs just below the $2,380 mark. The bright metal accelerated north early in the American session after the European Central Bank (ECB) monetary policy announcement and United States (US) employment data.
The ECB and trimmed the three main rates by 25 basis points (bps) each, as expected, with the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility coming down to 4.25%, 4.5% and 3.75%, respectively. The accompanying statement, however, was hawkish, as policymakers refused to anticipate additional cuts in the upcoming meetings. Across the pound, US Weekly Unemployment Claims rose more than anticipated in the week ended May 31, increasing to 229K vs the 220K expected.
The focus now shifts to US Nonfarm Payrolls (NFP). The country will release the May monthly report on Friday, which is expected to show that the US economy added 185K jobs in the month, above the 175K gained in April. Additionally, the Unemployment Rate is foreseen stable at 3.9%, while Average Hourly Earnings, a measure of wage inflation, are expected to have ticked up by 0.3% in the month from the previous 0.2%. A strong labor report could provide the US Dollar with bullish momentum, but speculative interest will likely sell it back after the dust settles.
XAU/USD short-term technical outlook
XAU/USD is up for a second consecutive day and trading near the aforementioned high. The risk skews to the upside, although additional confirmations are needed. In the daily chart, the pair is holding above a mildly bullish 20 Simple Moving Average (SMA), while the longer ones keep heading north far below the current level. Technical indicators, however, diverge as the Momentum indicator edges modestly lower below its 100 level, while the Relative Strength Index (RSI) indicator advances around 55.
The near-term picture is bullish. In the 4-hour chart, XAU/USD aims north above all its moving averages, surpassing a flat 100 SMA for the first time since April 23. At the same time, the 20 SMA gains upward traction and crosses above the 200 SMA, both at around $2,345. Finally, technical indicators aim firmly north within positive levels, reflecting persistent buying interest.
The European Central Bank trimmed interest rates by 25 bps as expected.
The focus shifts to the May United States Nonfarm Payrolls report.
XAU/USD trades at fresh two-week highs and may extend its advance towards $2,400.
Spot Gold trades with a bullish bias on Thursday, reaching fresh two-week highs just below the $2,380 mark. The bright metal accelerated north early in the American session after the European Central Bank (ECB) monetary policy announcement and United States (US) employment data.
The ECB and trimmed the three main rates by 25 basis points (bps) each, as expected, with the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility coming down to 4.25%, 4.5% and 3.75%, respectively. The accompanying statement, however, was hawkish, as policymakers refused to anticipate additional cuts in the upcoming meetings. Across the pound, US Weekly Unemployment Claims rose more than anticipated in the week ended May 31, increasing to 229K vs the 220K expected.
The focus now shifts to US Nonfarm Payrolls (NFP). The country will release the May monthly report on Friday, which is expected to show that the US economy added 185K jobs in the month, above the 175K gained in April. Additionally, the Unemployment Rate is foreseen stable at 3.9%, while Average Hourly Earnings, a measure of wage inflation, are expected to have ticked up by 0.3% in the month from the previous 0.2%. A strong labor report could provide the US Dollar with bullish momentum, but speculative interest will likely sell it back after the dust settles.
XAU/USD short-term technical outlook
XAU/USD is up for a second consecutive day and trading near the aforementioned high. The risk skews to the upside, although additional confirmations are needed. In the daily chart, the pair is holding above a mildly bullish 20 Simple Moving Average (SMA), while the longer ones keep heading north far below the current level. Technical indicators, however, diverge as the Momentum indicator edges modestly lower below its 100 level, while the Relative Strength Index (RSI) indicator advances around 55.
The near-term picture is bullish. In the 4-hour chart, XAU/USD aims north above all its moving averages, surpassing a flat 100 SMA for the first time since April 23. At the same time, the 20 SMA gains upward traction and crosses above the 200 SMA, both at around $2,345. Finally, technical indicators aim firmly north within positive levels, reflecting persistent buying interest.
Support levels: 2,355.20 2,445.90 2,333.60
Resistance levels: 2,381.80 2,394.25 2,408.60
XAU/USD Current price: $2,374.40
The European Central Bank trimmed interest rates by 25 bps as expected.
The focus shifts to the May United States Nonfarm Payrolls report.
XAU/USD trades at fresh two-week highs and may extend its advance towards $2,400.
Spot Gold trades with a bullish bias on Thursday, reaching fresh two-week highs just below the $2,380 mark. The bright metal accelerated north early in the American session after the European Central Bank (ECB) monetary policy announcement and United States (US) employment data.
The ECB and trimmed the three main rates by 25 basis points (bps) each, as expected, with the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility coming down to 4.25%, 4.5% and 3.75%, respectively. The accompanying statement, however, was hawkish, as policymakers refused to anticipate additional cuts in the upcoming meetings. Across the pound, US Weekly Unemployment Claims rose more than anticipated in the week ended May 31, increasing to 229K vs the 220K expected.
The focus now shifts to US Nonfarm Payrolls (NFP). The country will release the May monthly report on Friday, which is expected to show that the US economy added 185K jobs in the month, above the 175K gained in April. Additionally, the Unemployment Rate is foreseen stable at 3.9%, while Average Hourly Earnings, a measure of wage inflation, are expected to have ticked up by 0.3% in the month from the previous 0.2%. A strong labor report could provide the US Dollar with bullish momentum, but speculative interest will likely sell it back after the dust settles.
XAU/USD short-term technical outlook
XAU/USD is up for a second consecutive day and trading near the aforementioned high. The risk skews to the upside, although additional confirmations are needed. In the daily chart, the pair is holding above a mildly bullish 20 Simple Moving Average (SMA), while the longer ones keep heading north far below the current level. Technical indicators, however, diverge as the Momentum indicator edges modestly lower below its 100 level, while the Relative Strength Index (RSI) indicator advances around 55.
The near-term picture is bullish. In the 4-hour chart, XAU/USD aims north above all its moving averages, surpassing a flat 100 SMA for the first time since April 23. At the same time, the 20 SMA gains upward traction and crosses above the 200 SMA, both at around $2,345. Finally, technical indicators aim firmly north within positive levels, reflecting persistent buying interest.
July arabica coffee (KCN24) on Wednesday closed up +0.90 (+0.46%), and July ICE robusta coffee (RMN24) closed up +36 (+1.07%).
Coffee prices recovered from early losses on Wednesday and posted moderate gains. Forecasts for limited rainfall in Brazil until late next week sparked some short covering in coffee futures. Coffee prices initially moved lower Wednesday on a rebound in ICE coffee inventories after ICE-monitored arabica coffee inventories on Tuesday rose to a 1-year high.
Dryness in Brazil could reduce coffee yields, which would be bullish for prices. Somar Meteorologia reported Monday that Brazil’s Minas Gerais region received no rainfall or 0% of the historical average in the past week, the second consecutive week the area has received no rainfall. Minas Gerais accounts for about 30% of Brazil’s arabica crop.
Coffee prices have a negative carryover from last Friday when the International Coffee Organization (ICO) reported that global Mar coffee exports rose +8.1% y/y to 12.99 million bags and Oct-Mar global coffee exports were up +10.4% y/y at 69.16 million bags.
Coffee prices rallied sharply in April, with arabica coffee posting a new 2-year high and nearest-futures (K24) robusta coffee posting a new all-time high. Coffee prices surged on coffee crop concerns in Brazil and Vietnam. Robusta coffee surged to a new record high on fears that excessive dryness in Vietnam will limit the country’s robusta coffee production.
Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a bullish factor. On March 26, Vietnam’s agriculture department projected that Vietnam’s coffee production in the 2023/24 crop year would drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. Also, the Vietnam Coffee Association said that Vietnam’s 2023/24 coffee exports would drop -20% y/y to 1.336 MMT. In addition, Marex Group Plc forecasts a global 2024/25 robusta coffee deficit of -2.7 million bags due to reduced output in Vietnam.
Coffee inventories have rebounded from historically low levels. ICE-monitored robusta coffee inventories on February 21 fell to a record low of 1,958 lots, although they recovered to a 5-month high last Friday of 4,059 lots. Also, ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags on November 30, but they recovered to a 1-year high Tuesday of 701,423 bags.
There has recently been some bearish export news. Cecafe reported on April 10 that Brazil’s Mar green coffee exports jumped +41% y/y to 3.9 million bags. Brazil is the world’s largest producer of arabica coffee beans. Also, Brazil’s exporter group Comexim, on February 1, raised its Brazil 2023/24 coffee export estimate to 44.9 million bags from a previous estimate of 41.5 million bags. In a bearish factor for robusta, Vietnam’s General Statistics Office reported last Monday that Vietnam’s Apr coffee exports rose +3.9% y/y to 170,000 MT, and Vietnam’s Jan-Apr coffee exports are up +5.4% y/y to 756,000 MT.
This past year’s El Nino weather event has been bullish for coffee prices. An El Nino pattern typically brings heavy rain to Brazil and drought to India, negatively impacting coffee crop production. The El Nino event has brought drought to Vietnam’s coffee areas this year, according to an official from Vietnam’s Institute of Meteorology, Hydrology, and Climate Change.
In a bearish factor, the International Coffee Organization (ICO) projected last Friday that 2023/24 global coffee production would climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year. ICO also projects global 2023/24 coffee consumption will rise +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.
The USDA’s Foreign Agriculture Service (FAS), in its biannual report released on December 21, projected that world coffee production in 2023/24 will increase +4.2% y/y to 171.4 million bags, with a +10.7% increase in arabica production to 97.3 million bags, and a -3.3% decline in robusta production to 74.1 million bags. The USDA’s FAS forecasts that 2023/24 ending stocks will fall by -4.0% to 26.5 million bags from 27.6 million bags in 2022-23. The USDA’s FAS projects that Brazil’s 2023/24 arabica production would climb +12.8% y/y to 44.9 mln bags due to higher yields and increased planted acreage. The USDA’s FAS also forecasts that 2023/24 coffee production in Colombia, the world’s second-largest arabica producer, will climb +7.5% y/y to 11.5 mln bags.
More Coffee News from Barchart
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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.
