Fundamental analysis Gold for 06.05.2024
Gold's ascent against the dollar reversed a brief downturn as European trading kicked off on Monday, buoyed by unexpected softness in recent U.S. employment figures. This unexpected twist has spurred chatter about a probable Federal Reserve rate cut in September, which has, in turn, softened the greenback and bolstered gold, priced in dollars. The prospect of reduced interest rates could sweeten the appeal of holding onto non-interest-bearing gold, potentially spurring demand.
In April, the U.S. Nonfarm Payrolls disappointed, with only 175,000 jobs added compared to March's revised figure of 315,000 and falling short of the forecasted 243,000. This weaker-than-expected data has fueled expectations for a more accommodative stance from the Fed.
Simultaneously, indicators like the uptick in the Unemployment Rate to 3.9% from 3.8%, and the slowdown in Average Hourly Earnings growth to 3.9% year-over-year from the previous month's 4.1%, hint at potential soft spots in wage inflation.
Attention is now turning to forthcoming speeches by Fed officials Thomas Barkin and John Williams, eagerly awaited by gold traders for potential clues. Any dovish signals could reinforce the current upward momentum in gold prices.
Furthermore, remarks from Fed Governor Michelle Bowman underline concerns about lingering inflationary pressures, suggesting a willingness to hike rates, if necessary, a factor that could reverberate across gold markets.
Despite the backdrop of easing tensions in the Middle East, which could dull the appetite for traditional safe-haven assets like gold, market focus remains fixated on monetary policy cues.
Moreover, the latest ISM Services PMI data showing contraction at 49.4 in April, down from March's 51.4 and below expectations of 52.0, may further influence Fed decisions in the near term.
As the week unfolds, gold prices may sway in response to these economic signals and Fed commentary. With the likelihood of a September rate cut now hovering at nearly 90%, a sharp uptick following the employment report, investors are closely tracking these developments for potential implications on the gold market.
Technical analysis and scenarios:
The Alligator indicator indicates a sleeping market, both the Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in the green zone, indicating divergence. This divergence
indicates that the current trend is losing strength, but does not provide a clear direction for further
price movement.
Main scenario (SELL)
Recommended entry level: 2330.00.
Take profit: 2300.00.
Stop loss: 2360.00.
Alternative scenario (BUY)
Recommended entry level: 2360.00.
Take profit: 2400.00.
Stop loss: 2330.00.