February 4, 2023

XAU/USD sticks to modest intraday gains above $1,800 mark

  • Gold regained some positive traction on Tuesday and recovered a part of the overnight losses.
  • The risk-on mood, elevated US bond yields, a modest USD strength capped gains for the metal.
  • Investors now look forward to the US macro data for some impetus later during the NA session.

Gold gained some positive traction on Tuesday and reversed a part of the overnight sharp retracement slide from the $1,830-32 region, or the highest level since November 22. The uptick lacked any obvious fundamental catalyst and could be solely attributed to some technical buying near the very important 200-day SMA. The XAU/USD maintained its bid tone through the first half of the European session and was last seen trading just above the $1,800 mark, though the uptick lacked bullish conviction.

Hopes of steady economic recovery, to a larger extent, offset worries about the continuous surge in new COVID-19 cases globally and remained supportive of the optimistic market mood. This was evident from an extension of the recent bullish run in the equity markets to record highs, which acted as a headwind for the safe-haven gold. Apart from this, hawkish Fed expectations, rising US Treasury bond yields and a modest US dollar strength also contributed to cap the upside for the precious metal.

The money markets have fully priced in the first-rate hike by May and two more by the end of 2022. This, along with the prevalent risk-on mood, pushed the yield on the benchmark 10-year US government bond to 1.6420% for the first time since November 24 on Monday. Adding to this, the US 2-year and 5-year notes soared to their highest since March 2020, which continued underpinning the greenback and kept a lid on any further gains for the non-yielding yellow metal, at least for the time being.

Investors also seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of the key event/data risks. The Fed is due to release the minutes of its December monetary policy meeting on Wednesday. Apart from this, investors will take cues from important US macro releases scheduled at the beginning of a new month. A rather busy week kicks off with the release of ISM Manufacturing PMI and JOLTS Job Openings data later during the North American session.

This week’s US economic docket also highlights the release of the ADP report on private-sector employment on Wednesday and the ISM Services PMI on Thursday. The key focus, however, will remain on the closely watched US monthly jobs report – popularly known as NFP on Friday. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the dollar-denominated gold.

Technical outlook

From a technical perspective, a sustained break below the $1,800 mark might shift the bias in favour of bearish traders and prompt some technical selling. The XAU/USD might then accelerate the slide towards the $1,785 horizontal support en-route the $1,770 region and December swing low, around the $1,753 area.

On the flip side, the $1,830-32 region should continue to act as a key barrier, which if cleared decisively should push gold prices further towards the $1,850 region. The upward trajectory could then allow bulls to challenge November 2021 swing high, around the $1,877 with some intermediate hurdle near the $1,870 area.

Gold daily chart


Levels to watch


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