Gold price retested last week’s low as traders digest Jerome Powell’s before the Senate. Signs that the US labor market remains strong have added to the persistent fears over higher interest rate hikes by the Federal Reserve. The environment will likely exert additional pressure on the precious metal in the ensuing sessions.
The Fed Chair made a case for further interest rate hikes as the central bank strives to deal with high inflation and a strong labor market. As is the case with other precious metals, a hawkish Fed is a bearish driver of gold price.
Granted, the probable downtrend may not be as steep as the one recorded last year. This thesis is founded on gold’s status as a safe haven in times of economic turmoil.
In the ensuing sessions, investors will be eyeing the US nonfarm payrolls data set for release on Friday. This comes after the strong January report that saw over 500,000 jobs added to the US economy. Besides, unemployment rate dropped to a level last recorded in 1969.
Analysts expect 205,000 jobs to have been added in February. While a figure lower than January’s reading may offer some support to gold price, signs that the US labor market remains strong is set to curb its gains especially after Powell’s hawkish tone.
Gold price prediction
Earlier on Wednesday, XAU/USD dropped to a one-week low at 1,810.06 before erasing some of those losses. As at the time of writing, it was up by 0.06% at 1,814.41.
While it is still trading the long-term 200-day EMA, gold price dropped below the 50-day EMA on Tuesday. These technical indicators indicate that the bears are in control. Indeed, I am of the opinion that this will be the case for as long as the precious metal continues to trade below the crucial resistance zone of 1,850.
In the ensuing sessions, 1,830.59 will be a resistance level worth watching. On the lower side, the bulls are keen on defending the support at 1,805.78, which is along the 200-day EMA. However, further rebounding of the US dollar may give the bears an opportunity to push gold price lower to 1,783.33 or 1,767.30.