Gold Gains Support at $1,850 – Good Time to Go Long?

The gold price is up at $1,853.70, offsetting some of the price imbalance left over from last week. The US dollar rallied following the US NFP (Nonfarm Payrolls) figures, extending gains for the day. The strong jobs report reinforced the Fed’s stronger rate hike cycle, and higher Treasury yields, which decreased bullion’s demand, were the straw that broke the camel’s back. The 10-year yield hit 2.99 percent on Friday, up from the previous week’s low of 2.70 percent but still below the May 9 peak of 3.20 percent. The 2-year yield hit a high of 2.69 percent on Friday, up from a low of 2.44 percent the previous week.

The Labor Department stated in its closely monitored labor report on Friday that nonfarm payrolls in the United States increased by 390,000 last month, far exceeding forecasts of around 325,000 jobs in May. “The May report supports the view that, while the labor market remains firm, it is gradually slowing,” TD Securities analysts said.

“We believe the report does not alter the Fed’s calculation, supporting their preference to front-load interest rate hikes until it reaches a more neutral stance by the fall.”

This report will have little impact on currency prices, but it does indicate that the better the data, the more tough a pause or reduced pace of tightening later this year will be.

US Inflation Figures Ahead

Analysts believe that the upcoming US Consumer Price Index and MoM readings will be more important for overall USD dynamics. However, core prices are likely to have remained strong in May, with the series posting its second consecutive 0.5 percent MoM increase.

Previously a drag on inflation, we now expect used vehicle prices to contribute, rising for the first time in four months. However, we also expect continued momentum in airfare and housing inflation. A rise in US CPI figures typically leads to increased demand for inflation-hedging assets such as GOLD.

Gold Technical Outlook

Gold made a strong bullish move to $1870; however, the uptrend was short-lived as the precious metal plunged to trade at the $1,853 level.

Closing of candles above the support level of $1,849 reinforces expectations of a continuation of the bullish trend, which primarily targets 1,870, noting that the price moves within a bullish channel, which supports the chances of exceeding the mentioned level to achieve additional gains on an intraday and short term basis.

The bull market trend scenario will generally stay operational and dominant in the coming sessions if prices remain above 1850 and 1838.10 levels. Today’s trading range is expected to be between 1850 support and 1890 resistance. Good luck!