The strong decline in the price of the US dollar allowed the XAU/USD gold price to make a strong upward rebound with gains towards the resistance level of $1804 an ounce, the highest price in four months. However, with results stronger than all expectations of the US job numbers by the end of the week, the price of gold was exposed to quick profit-taking operations. This happened as a result of which it pushed towards the level of $1778 an ounce, before closing trading around the level of $1798 an ounce.
- Gold prices fell after the stronger-than-expected US jobs report in November.
- The price of the yellow metal, which gained 3% last week, fell on expectations that the Federal Reserve may have the ammunition to be more forceful in tightening amid hot US jobs data.
- Many economists expected a slowdown in US employment growth due to the central bank's hike in US interest rates, but this has not been the case so far.
With the recent performance, gold prices recorded a weekly jump of about 2.5%, which will put gold in the positive zone of 2% for this year 2022. Silver prices, gold’s sister commodity, also fell at the end of the trading week. Silver futures fell to $22.69 an ounce. The price of the white metal rose by about 5.5% last week, allowing silver to erase almost all its losses since the start of the year.
The main event for the markets last Friday was the US jobs report for November.
Last month, the US economy added a total of 263,000 new jobs, above market estimates of 200,000 jobs. While that was down from the upward rate of 284,000 in October, it was still an impressive number that sent financial markets back down. A breakdown of economic figures showed average hourly earnings rising 5.1% year-on-year in November and 0.6% month-on-month in November. The labor force participation rate fell to 62.1%, while the average weekly working hours fell to 34.4. In general, investors are concerned that the Fed may reduce some of its pessimism, leading to higher interest rates.
Gold prices are sensitive
In general, the price of gold is generally considered sensitive to a rising interest rate environment because it raises the opportunity cost of holding non-yielding bullion. The US Treasury market was mostly higher across the board, with the 10-year yield rising 6.3 basis points to 3.59%. The one-year note rose 7.7 basis points to 4.733%, while the 30-year note rose 1.7 basis points to 3.649%.
Although the US dollar pared some of its huge gains, the US Dollar Index (DXY) was 0.26% worse, to 105.00, from an opening of 104.73. As it is known, the US dollar index, which measures the performance of the US currency against a basket of other major currencies, recorded weekly gains of about 0.85%, in addition to its rise since the beginning of the year 2022 to date at 9.5%.
Generally, a stronger dividend is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to buy.
On the other hand, speaking at the Brookings Institution last week, Federal Reserve Chairman Jerome Powell suggested that the Federal Open Market Committee (FOMC) could slow the pace of interest rate hikes. Markets are still mostly expecting a 50 basis point gain at this month's policy meeting, but investors are only expecting a reversal in the tightening cycle in the first quarter of 2024.
In other metals markets, copper futures fell to $3.7865 a pound. Platinum futures fell to $1,019.60 an ounce. Palladium futures fell to $1,885 an ounce.
XAU/USD gold price forecast today:
According to the performance on the daily chart below, the stability of the XAU/USD gold price around and above the psychological resistance at $1800 an ounce still supports the bullish trend. It is sufficient to move the technical indicators towards overbought levels. Gold is best sold from the $1818 and $1830 resistance levels, respectively. On the other hand, according to the performance over the same time period, breaking the support level at $1775 will be important in starting a downward reversal. The price of gold today will be affected by the level of the US dollar and whether or not investors are willing to take risks.
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