Gold prices has entered a brief phase of upside consolidation as buyers take a breather before the next leg higher. The buying interest around the bright metal remains unabated amid sustained US Dollar (USD) weakness as increased odds of further interest rate cuts by the Federal Reserve (Fed) due to US economic slowdown concerns.
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US President Donald Trump’s tariff war is expected to increase inflation, rekindling stagflation fears.
Even though Trump announced a one-month pause on the auto tariffs while considering agricultural exemptions on Canada and Mexico, the USD sellers refuse to give up amid a recent series of dismal US economic data and a relentless surge in the EUR/USD pair.
Data released by the ADP Research showed on Wednesday that the US private sector added 77K jobs in February after creating 186K jobs in January. The data missed the expectations of 140K by a wide margin. However, the Institute for Supply Management (ISM) Services PMI rose to 53.5 in February, exceeding forecasts for 52.6. The ISM Services Employment Index jumped to 53.9 in February from 52.3 in January.
The Euro (EUR) jumped to a four-month high against the USD, tracking the rally in the German bund yields after German political parties agreed on a massive spending plan to support the Eurozone’s biggest economy. Surging German bund yields drove global yields higher, including the US Treasury bond yields, capping the Gold price recovery.
Gold traders now eagerly await Friday’s Nonfarm Payrolls (NFP) data to assess the Fed’s easing trajectory amid growing trade tensions between the US and its trading partners.
In the meantime, the mid-tier US Jobless Claims data and further developments on the tariffs front by the Trump administration will be closely followed for any impact on the USD performance and the Gold price action.
The upcoming European Central Bank (ECB) policy decision could curb the EUR/USD rally, fuelling a fresh US Dollar rebound. In such a scenario, Gold price could see a corrective move lower, which could also be seen as a profit-taking decline ahead of the all-important US payrolls data on Friday.
The short-term technical outlook for Gold price remains more or less the same as long as it defends the 21-day Simple Moving Average (SMA) of $2,906.
The uptrend could regain traction only on acceptance above the $2,930 static resistance on a daily candlestick closing basis.
The Relative Strength Index (RSI) has turned slightly lower but holds well above the 50 level, suggesting that the bullish potential remains in place.
If the February 26 high of $2,930 is taken out sustainably, the next topside barriers are at an all-time high of $2,956 and the $2,970 round level.
If sellers fight back control, immediate support is seen at the 21-day SMA at $2,906, below which the $2,850 psychological barrier will be challenged.
The $2,835 demand area will then come into play.
