At the end of last week’s trading, XAU/USD gold prices rebounded strongly, taking advantage of the decline in the price of the US dollar. The price of the yellow metal jumped towards the resistance level of $1682 per ounce, rebounding from the support level of $1616 per ounce ahead of the US data. Its gains were supported by a calm trend in the US labor market. Despite a better-than-expected U.S. jobs reading in October, investors were enthusiastic about falling job gains as it could prompt the Federal Reserve to ease tightening in its hawkish campaign to beat the US. record inflation.
After strong gains, XAU/USD gold prices recorded a weekly rise of around 1.25%, reducing its decline since the start of 2022 to date to less than 9%. Recent gains have moved some technical indicators towards overbought levels, so don’t be surprised that the price of gold is exposed to take profit trades. Similarly, the price of silver, gold’s sister commodity, rose to its highest level in three weeks, breaking above the $20 high. As a result, the price of the white metal enjoyed weekly gains of around 7%, reducing its loss in 2022 to around 12%.
According to official figures, the US economy added a total of 261,000 new jobs, stronger than expected in October, above the market estimate of 200,000 jobs. The country’s unemployment rate rose to 3.7% from 3.5% in September. The labor force participation rate decreased to 62.2%, the average working week decreased to 4.7% year-on-year and the average working week remained unchanged at 34.5. Employment gains were widespread, led by healthcare (53,000), professional and technical services (43,000), recreation and hospitality (35,000), manufacturing (32,000) and government ( 28,000).
For his part, Federal Reserve Chairman Jerome Powell pointed to the strength of the US labor market, which makes it difficult to fight runaway price inflation. But if the US labor market cools further as we approach 2023, could that force the Eccles building to a halt when interest rates rise? Powell thinks it’s “too early” to consider the idea.
Gold prices are sensitive
Meanwhile, the US Treasury market was mixed, with the benchmark 10-year bond yield rising 1.1 basis points to 4.135%. One-year note yields jumped one basis point to 4.788%, while 30-year note yields rose 5.5 basis points. The price of gold is generally considered sensitive to a high interest rate environment as it increases the opportunity cost of holding non-performing bullion. Another factor affecting the gold market. The US Dollar Index (DXY), a measure of the US currency against a basket of major currencies, fell 1.09% to 111.70, after opening at 112.93. However, the dollar is heading for a weekly gain of around 0.8%. A weak US dollar is good for dollar-denominated commodities because it makes them cheaper for foreign investors to buy.
In other metals markets, copper futures hit $3.6545 a pound. Platinum futures hit $950.60 an ounce. Palladium futures rose to $1,891.00 an ounce.
Technical forecast for XAU/USD gold price today:
- XAU/USD Gold price broke through the $1660 and $1685 resistance levels which support the dominance of the bulls.
- Control needs to test the psychological high of $1700 an ounce to confirm the upward shift.
- The recent rebound gains have moved some technical indicators towards overbought levels, and if the metal fails to gain momentum, the gold market may be exposed to profit-taking trades at any time.
- The trading week is no less important than last week, so be careful.
To reverse Gold’s overall downward trend, prices need to rally back to around the support levels of $1655 and $1638, respectively. Recent performance confirms the importance of the trading strategy we always recommend, which is to buy gold at every bearish level.
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