Gold News: Gold Market Faces Critical Week as NFP and ISM Data Loom
On the downside, the market is currently engulfed by a number of retracement levels, including the long-term 61.8% level at $4541.88, the short-term 50% level at $4495.33 and the short-term 61.8% level at $4401.82.
Traders have also been defending $4481.78, or the level that represents a 20% decline from the all-time high at $5602.23. By definition, this level separates the bull market from the bear market.
Underneath every support level is the 52-week moving average at $4199.66. This is the long-term support and trend indicator. Last week, the market successfully tested the 200-day moving average, producing a daily reversal. I expect a similar reaction if the 52-week MA is tested.
On the upside, the long-term 50% level at $4744.34 is the key to sustaining any rally. However, we expected some noise at $4850.68 to $5028.04. Inside this area is also the swing top at $4891.54. Taking everything into consideration, overtaking this area is likely to fuel a strong rally.
The direction this week is likely to be determined by trader reaction to $4541.88. A sustained move over this level is likely to bring in new buyers with $4744.34 the first objective.
A failure to overtake $4541.88 will be a sign of weakness, but sellers could face labored pressure until $4366.23. If this level fails then play for the dip into the 52-week MA at $4199.71.
The problem with gold in my opinion is the unwillingness to buy strength or take out offers at current price levels. Everybody seems to be waiting for dips or value and when they get it, they buy it. But when they see resistance, they sell it. The issue for long-term buyers is that the bottoms keep getting lower.
It’s as if traders are still trying to figure out where the value is. Once they do get the price they are looking for then they’ll start taking out offers to drive the market higher.
Weekly Outlook
The short-term bias is bearish because the rate story has not changed. Real yields are elevated, the U.S. Dollar Index is firm, and the Federal Reserve has given no signal that cuts are coming. Friday’s Employment Situation Report is the gate. A strong print reinforces everything that has been pressuring Spot Gold (XAUUSD) for weeks and puts the $4,360 to $4,500 support back under the microscope.
A weak print is the first crack in the wall and the short-covering rally that follows could move fast with central bank buyers underneath providing the floor.
The level is $4,541.88. A sustained move over it confirms the closing price reversal bottom and opens a run at $4,744.34 with noise expected between $4,850.68 and $5,028.04. Failure to hold above $4,541.88 keeps sellers in control with $4,366.23 as the next test and the 52-week moving average at $4,199.66 waiting below that.
The gold trade right now is simple. Everybody wants to buy value and nobody wants to chase. Until that changes, the bottoms keep getting lower.
If you’d like to know more about how to trade gold, please visit our educational area.
