Gold price edged lower on Monday ; easing from the three-week high it hit in the previous session. As the market digests the latest US jobs data, focus is shifting to the US inflation data slated for the new week. As at the time of writing, the precious metal was at $1,679.54 per ounce; down by 0.04%.
Fundamentals
It is not unusual for a financial asset to pull back after recording significant gains in the previous session. On Monday, gold price dropped to an intraday low of $1,667.91 after rising to a three-week high on Friday.
The gains recorded on Friday were the market’s reaction to the US jobs data, which heightened hopes that the Federal Reserve will be less aggressive in hiking interest rates in coming months. In response to the figures, the US dollar dropped by close to 2%; making gold price less expensive for buyers holding other currencies.
According ANZ’s head of FX research, Mahjabeen Zaman, the US dollar will likely remain strong at least in the short term. During an interview with Bloomberg Markets, the economist noted, “…over the next three to four months,the dollar will continue to keep moving higher”. A strong labor market and high Treasury yields are the basis of this forecast.
As the week unfolds, the focus will be on US inflation data. The figures, which are due for release on Thursday, will offer further directional cues on the Fed’s move in its December meeting. While the market appears to favor a rate hike of 50 basis points, higher-than-expected CPI numbers could heighten bets for a 75 basis points increase. If that happens, the US dollar may edged higher while exerting pressure on gold price.
Gold price prediction
As seen on its daily chart, gold price continued to trade below the 50-day EMA on Monday while holding steady above the short-term 25-day EMA. Even with the gains recorded on Friday, the precious metal has remained below the once steady support zone of 1,700.
Indeed, the aforementioned level has been evasive for a month now; a trend that I expect to continue in the ensuing sessions. In particular, the range between 1,693.31 and 1,657.75 will be worth watching. A pullback past the range’s lower border will give the bears an opportunity to retest the lower support zone of 1,642.51.
