Gold Completes 38.2% Fib Retracement: What’s Next?
Gold prices closed at $1809.75 after setting a high of $1811.65 and a low of $1794.85. GOLD continued its rising trend for the third consecutive session on Wednesday amid the constant weakness of the US dollar and the overall safe-haven demand for precious metals. The US Dollar Index, which measures the greenback’s value against the basket of six major currencies, fell for the third consecutive session and reached the 95.81 level. The dollar was low due to the unexpected decline in the number of job creations in January. The US employment growth was not satisfactory in the first month of 2022, and it kept the US dollar under pressure on Wednesday.
On the data front, at 18:15 GMT, ADP Non-Farm Employment Change dropped to -301K against the 185K and weighed on the US dollar, which pushed gold prices higher. The dismal jobs data on Wednesday portrayed a negative impression on employment growth which ultimately weighed on the Fed’s plans to raise interest rates in the near future. The Fed has said that the macroeconomic data and COVID-19 developments will be set as the gauge for the next rate hike after March.
On the other hand, the safe-haven demand for gold also kept the precious metal higher on Wednesday after US President Joe Biden directed the Pentagon to deploy more than 3,000 American troops to strengthen the defense of European allies in the first major movement of US forces in Russia’s military standoff with Ukraine. This decision came after the fears of a Russian invasion of Ukraine escalated in the market. It must be noted that US troops being deployed will not fight in Ukraine but will ensure the defense of US allies. However, the increasing tensions at the Ukraine border were enough to increase demand for safe-haven gold and push its prices higher in the market.
Meanwhile, on Tuesday, the World Health Organization (WHO) said that the recently discovered sub-variant of the highly contagious Omicron variant had been detected in about 57 countries. Reports suggested a little difference between the sub-variant BA.2 (Stealth variant) and the original Omicron variant; however, the stealth variant was still considered more infectious than the original one. The United Nation’s health agency said that some countries showed signs where the Stealth variant accounted for more than half of all Omicron cases. This report from WHO could have also supported the rising prices of gold on Wednesday.
On Thursday, the US economic docket will release the ISM Services PMI report, which will impact the US dollar. Other less impacted reports that will be released are Unemployment Claims from the past week, Final Services PMI, Factory Orders, and Prelim Nonfarm Productivity of the quarter. Market participants will have close eyes on ISM Services PMI to guess the future momentum of gold prices.
Gold (XAU/USD) Technical Outlook
Gold completes a 38.2 percent Fibonacci retracement at $1,808 before reversing bearishly. Gold is currently trading at $1,805 and is heading south towards an immediate support level of $1,799. Under this scenario, gold’s next support level is at 1,791, which is extended by a double bottom level.
On the upside, XAU/USD may encounter resistance at the 1,809 level. The uptrend can be extended by 50 percent or 61.8 percent Fib levels until the 1,818 or 1,826 level. Because the RSI is above 50, the chances of a buying trend remain high. So, consider remaining bullish if the price crosses above 1,809, and vice versa. Best wishes!
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