The US Dollar gains ended which helped to revive the price of gold. The price of gold is still under downward pressure in light of strong expectations that the US Federal Reserve will continue to raise interest rates, and US job numbers were supportive of those expectations.
On another level, it supports the gold market. Global central banks continue to boost gold. Central banks globally added a net 77 tons to their reserves in August, according to the latest data compiled by the World Gold Council. This was the third consecutive month of net purchases. Over the past three months, net purchases of gold by central banks amounted to 219 tons. In March, April and May, central banks reported net gold sales, mainly because Turkey sold 160 tons of gold during that three-month period. According to the World Gold Council, this was a specific response to local market dynamics and does not likely reflect a change in the Turkish Central Bank's long-term gold strategy.
Turkey returned to buying gold in June, and added another 14.7 tons in August, joining China, Poland and Uzbekistan as the largest buyers for the month. According to the World Gold Council, the Turkish government restored gold import quotas in early August. There was some speculation that domestic shortages might lead to central bank sales of gold to meet demand, but this was clearly not the case.
The People's Bank of China ranked first as the largest buyer in August, adding 28.9 tons of gold to its holdings. This was the tenth consecutive month of purchases by the Chinese central bank. China is the largest buyer of gold since the beginning of the year, as its official reserves have increased by 166 tons since the beginning of the year and 217 tons since it resumed official purchases last November. The People's Bank of China now officially owns 2,165 tons of gold, which makes up 4% of its total reserves.
From a fundamental analysis point of view, gold is trading influenced by the results of recent economic data. US jobs data for September beat the expected number of jobs at 170,000, with a total of 336,000. On the other hand, the average hourly wage growth for this period exceeded the forecast (on an annual basis) of 4.3% with a growth rate of 4.2%, while the equivalent (on a monthly basis) fell below 0.3% with a record of 0.2%. The US unemployment rate for this period remained unchanged from August at 3.8%, contrary to the expected rate of 3.7%, while the labor force participation rate remained steady at 62.8%.
Prior to that, last week's US Initial Jobless Claims exceeded expectations of 210K for a total of 207K, while continuing claims are also impressive with a total of 1.664M versus expectations of 1.675M. Earlier in the same week, the ISM services PMI for September was in line with expectations at 53.6. On the other hand, the US ADP employment report for this period missed the expected number of jobs of 153 thousand with 89 thousand.
Technical analysis of gold prices:
- Gold XAU/USD continues to trade below the 100-hour moving average line on the hourly chart.
- Friday's decline pushed the price of gold to the oversold levels of the 14-hour Relative Strength Index.
- In the near term, the price of gold appears to be trading within a neutral channel.
- This indicates that there is no clear directional bias in market sentiment.
- Therefore, the bears will target extended pullbacks at around $1,806 or lower at $1,795 an ounce. On the other hand, the bulls will be looking to pounce on potential highs at around $1838 or higher at the $1847 resistance.
In the long term, and according to the performance of the daily chart, it appears that the gold price, XAU/USD, is trading within a sharply bearish price channel. This indicates a significant long-term downward bias in market sentiment. Therefore, the bears will look to ride the current decline towards $1,774 or lower to the $1,739 support. On the other hand, the bulls will target longer-term reversals at around $1850 or higher at the $1884 resistance per ounce.
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