Gold Stretches Into Key Resistance - April Outlook Hinges on Fed, NFP
Fundamental Forecast for Gold:Neutral
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- Gold (XAUUSD): Looking for Successful Test of Support Before Higher Price
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Gold prices are higher for a second consecutive week with the precious metal advancing 1.48% to trade at 1199 ahead of the New York close on Friday. The advance amid a broader risk sell-off as mixed Fed rhetoric & rising geopolitical risks in the Middle East spurred demand for the yellow metal. Although the immediate rally in gold may is vulnerable here (+5% off the monthly low), the recovery remains in focus after last week’s key reversal off critical long-term support.
Looking into next week, all eyes turn to the US Non-Farm Payroll (NFP) report with consensus estimates calling for a 250K print for the month March as unemployment holds steady at 5.5%. Note that this would be the 13th consecutive month of 200+K gains as the jobless rate stands at the lowest level since 2008. However, another dismal wage growth figure may become a growing concern for the Fed and undermine expectations for a mid-2015 rate hike as the central bank struggles to achieve the 2% inflation target. As a result, the slew of Fed rhetoric lined up for the days ahead may continue to highlight the risk for a further delay of the normalization process, which could dampen the appeal of the greenback and spur greater demand for bullion.
From a technical standpoint, gold spiked into a key median-line resistance dating back to September at 1219 before reversing sharply back into the former resistance noted last week, now support, at 1196/98. The trade is vulnerable for a pullback early next week but the bias remains constructive while above the 1167/72 barrier where the 61.8% retracement of the advance converges with a former resistance line off the 2015 high (bullish invalidation). That said, key near-term resistance remains with the March opening range high / ML resistance noted earlier at 1219/23- with a breach above targeting the 200-day moving average at 1238 backed by key resistance at 1245/48. Note that the daily momentum signature has not topped 60 since the January high and a hold below this RSI level puts the long-side at risk heading into to the start April trade. A breach through alongside a move surpassing 1225 reaffirms a broader correction here for the yellow metal.
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