Gold prices have experienced an over 11% decline since their May peak above $2,000 per ounce due to the Federal Reserve’s hawkish stance, which has driven long-term bond yields to a 16-year high. After breaking below the psychological support of $1,900 last week, gold found support around $1,820 and currently resides in oversold territory. Silver also follows a similar pattern.
Non-Farm Payroll Data Impact
The upcoming Non-Farm Payroll (NFP) data is expected to play a crucial role in shaping the precious metals market. A stronger-than-expected NFP report could lead to further correction in gold and silver prices. The consensus estimate for NFP is a gain of 170,000 jobs compared to September’s 187,000 rise. The recent disappointing ADP jobs report has raised concerns of another downside surprise in the NFP data.
Fed’s Influence
Gold’s recent weakness can be attributed to the strengthening US dollar and rising Treasury yields. Despite a recent retracement in the US dollar and yields, gold has struggled to rebound. The Federal Reserve’s hawkish stance continues to limit gold’s upside potential.
Outlook for Gold
While a strong rally in gold is not anticipated in the short term due to potential Fed actions, there is optimism for 2024. Some Fed members favor another rate hike, but the outlook suggests that the Fed may consider rate cuts before August 2024. This prospect could have a positive impact on gold and silver prices.
Technical Analysis and Opportunity
Technically, MCX Gold is in an oversold condition with the Relative Strength Index (RSI_14) at 25, historically indicating potential reversals. The outcome of today’s employment data will be crucial. If it favors gold, it may present a favorable long opportunity. For those with short positions, booking profits is suggested. Going long around 56,000-55,500 with a target of 57,500 and a stop loss at 55,200 could be considered as a potential trade strategy. However, market participants should remain cautious and monitor the Fed’s actions closely for further cues.