Gold continues with its bullish momentum and was up 0.5% on Thursday at 16:30 UTC, trading at $2,060 on the spot market. With interest rates remaining high in the United States, the incentive to push gold further up has to come elsewhere. However, as things stand, the US economy is relatively stable and the underperforming Chinese economy could mean reduced demand for the yellow metal.
The V-shape recovery pattern will likely hold as the market awaits Non-farm payroll data on Friday. Two key releases have come out over the last 24 hours, but they have done little to change bullish investor views towards gold. A hawkish Fed decision on Wednesday was followed by positive US manufacturing PMI on Thursday, which came in at 49.1 against an expected 47.2.
With the US economy holding steady and combining with the FOMC to cushion the dollar, investors will likely be looking to China’s economy for XAU/USD signals. The world’s second-largest economy faces headwinds, with a dented property market, slowed manufacturing and reduced exports. Consequently, many investors have started directing their money away from Chinese stocks, and safe haven assets like gold stand to benefit.
Nonetheless, China has taken measures to stimulate economic activity, but this could take some time to reflect. In the meantime, gold’s critical support remains at $2,000 an ounce, while resistance will likely remain around the $2,060 level.
In the short-term, eyes will be on yields of 10-year US Treasury’s, which are currently at a one-month low following Fed’s decision yesterday. A rise in the yield could take some of the momentum away from gold. In the medium-term, the focus should be on the Fed’s next rate cut decision in May, which, if executed at 100 basis points, could exert pressure on the dollar, to gold’s advantage.
XAU/USD intra-day action
XAU/USD is currently displaying a bullish RSI, and has already breached the psychological resistance level at $2,050, moving the support to $2,038 and the next one to $2,055. Price action below $2,038 could move the support to $2,031, below which the next target will be $2,024.
This post was last modified on %s = human-readable time difference 16:32