Gold edged lower ahead of non-farm payrolls as recession fears challenge gold bulls near multi-month highs

2023-04-07 16:18:15

Spot gold prices were consolidating during the Good Friday holiday on Friday, but were set to post gains around $2,007 this week. Market sentiment was cautious ahead of the release of the U.S. non-farm payrolls report in March, coupled with fears of a recession, limiting gold trading. However, it should be pointed out that the recent poor data in the United States and the easing of the hawkish concerns of the Federal Reserve led to a decline in the dollar and pushed up the price of gold.

Gold prices, which have soared strongly in recent days, need a technical correction because the previous rally was very strong. And before the U.S. non-agricultural data came out, the bulls took some profits. However, weak U.S. economic data raised market expectations for the Federal Reserve to cut interest rates within the year. In addition, gold prices were also supported by safe-haven buying, limiting the room for gold price corrections.

The recent sustained surge in gold prices, approaching the all-time high reached in the summer of 2020, can be attributed to concerns about an economic slowdown. Judging from the economic data released by the United States this week, the results are all lower than expected, so the risk sentiment of economic recession has gradually become stronger in the market.

All eyes are now on Friday's non-farm payrolls data. The data will be a key factor affecting the Federal Reserve's next interest rate decision, which is very likely to cause greater volatility in the market. The current market expects non-farm payrolls to increase by 215,000 in March, lower than the previous value of 265,000. Over the past year or two, non-farm payroll growth has been more than expected.

If the data continues to fall short of expectations, it will produce signs that the U.S. economy is not doing well or even has entered a recession, thereby strengthening the view that the Fed will reverse the direction of monetary policy. At that time, the gold bulls will continue to have the upper hand. Volatility in precious metals markets will be high. Macroscopic changes appear to be moving in favor of gold.

On the contrary, gold prices may continue to retreat to the support confluence of $1990, and focus on the US inflation rate and the minutes of the Federal Reserve meeting.

Spot Gold Technical Analysis

Gold recently fell below key support at $2,010 after testing the year's high of $2,032.13 in March 2022.

The above-mentioned support levels are now turned resistance levels, including the 38.2% retracement of the one-day swing and the previous month's high.

Once the rebound breaks through $2010, the 61.8% retracement of the one-week band and the 10SMA on the 4-hour chart will limit the rise of gold prices around $2015, and then the upward trend will resume.

After that, the price of gold may rise towards $2035.

Conversely, sustained trading below $2,010 could drag gold down to another key support level at $1,990.

A break below $1,990 could see gold falling towards a February 2022 peak of $1,960 and multiple lows of $1,950.

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