Gold (XAU/USD) price rises over 1.50% above $4,130 on Monday as the Greenback weakens, even though last Friday’s stellar US jobs data triggered a modest hawkish repricing, with markets increasing bets on a Federal Reserve (Fed) rate hike in December.
XAU/USD advances as Oil plummets, weighing on the USD despite rising Fed tightening speculation
US equities are recovering, reflecting a risk-on mood, in part because US President Donald Trump said it's “highly unlikely” he will order further strikes on Iran. Consequently, West Texas Intermediate (WTI), the US Oil benchmark, tumbled nearly 6% to $85.00, dragging the Greenback lower due to its positive correlation.
As of writing, reports emerged that US-Iran nuclear talks had been revived. Al-Arabiya, citing sources, reported that a Qatar-Pakistani proposal would allow Iran to enrich uranium to 3.67%, with Washington reportedly agreeing to the terms and Tehran accepting the proposal.
The US Dollar Index (DXY), which tracks the performance of the buck’s value against its peers, is down 0.46% to 101.81. On the other hand, the US 10-year Treasury yield rises two basis points to 4.889% as traders begin to price in further tightening after last Friday’s jobs report.
Nonfarm Payrolls crushed estimates, pushing the Unemployment Rate down from 4.2% to 4.1%. The CME FedWatch Tool shows that the odds of a December rate increase are 84%, up from last Friday’s 76%.
Due to its non-yielding nature, Gold usually fares badly amid high interest rate scenarios, but remains supported by central bank buying, as the People’s Bank of China (PBoC) added nearly 25.8 metric tons of the precious metal to its reserves in October, its largest monthly purchase in three years, according to the World Gold Council.
Federal Reserve (Fed) officials crossed the wires. Richmond Fed President Thomas Barkin commented that there’s no base case (in rates) for December, adding that the risk lies on the inflation side of the mandate.
Earlier, Chicago Fed President Austan Goolsbee was hawkish, saying that services inflation is beginning to “pick up,” that it has become a “big problem,” and that the Fed has to come to terms with failure on inflation.
Eyes shift to the release of the US Consumer Price Index (CPI) on Tuesday, which is expected to rise from 3.7% to 3.9% YoY in October. Core CPI is forecast to rise from 2.6% to 2.8% YoY.
XAU/USD technical outlook: Gold struggles at $4,100 and retreats
Gold price begins the week on a positive note, but it remains below last Thursday’s high of $4,146. Price action shows a modest jump, but momentum suggests that further consolidation lies ahead, with the Relative Strength Index (RSI) bracing for the 50-neutral level.
For a bullish continuation, XAU/USD must clear the confluence of the 100- and 50-day Simple Moving Averages (SMAs), at $4,191 and $4,201, respectively. Once hurdled, the next stop is the psychological $4,300.
On the downside, sellers must push Gold below $4,100, then $4,000. Once cleared, the next area of interest would be the November 4 daily low at $3,919, followed by the October 30 year-to-date low at $3,879.
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