Will $2,000 Turn Into Support for Gold?
Gold found support at the $2,000 level yesterday which is a bullish signal, but today's NFP report might send XAU either way
Gold has made attempts to break above the $2,000 mark in the past but ultimately failed. However, with the end of the tightening cycle, it may finally be time for Gold make new record highs after it broke the $2,000 level. After a pullback in February, Gold reversed higher in March as the USD resumed the decline and rallied back above $1,900 amid banking turmoil.
There was an attempt to breach the $2,000 level two weeks ago but buyers failed again. However, developments in the bond market suggest a return to lower yields, which could be a major tailwind for Gold. The FED meeting in May is going to be very important in determining if Gold can hold the gains after the break above $2,000, and the US NFP report later today may play a crucial role in this. A sustained break above $2,000 could lead to a potential breach of the 2020 and 2022 highs around $2,075 region.
Alth0ugh, XAU/USD has shown uncertainty after a rally above the $2,000 level on Monday. There is some divergence between FED speakers and money markets, and more guidance is needed, possibly in the form of economic data which will give GOLD further direction. Market expectations show rate cuts close of 100bps by the end of the year, while some FED officials are calling for further rate hikes above the 5% rate to maintain downward pressure on inflation.
Recent economic data which has shown weakness in the US has supported market expectations of the FED stopping rate hikes, but the Non-Farm Payroll (NFP) numbers will be the mot important event for the week. If the NFP figures beats expectations, it may give the USD additional support which will leave Gold vulnerable.
FED member Bullard will held a speech later yesterday, and he continued to beat the same drum, of keeping rates higher for longer, but he is a normal hawk at the FED so that was expected. Real yields continue to fall, but an NFP beat could increase interest rate projections and increase the opportunity cost of holding Gold, exposing XAU/USD to the downside.
Gold XAU Live Chart
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