Gold Analysis: Gold jumps amid the weaker Greenback

On Tuesday (October 4), Gold gained substantial positive momentum and reached its highest level in three weeks. Gold continues its upward trajectory and is returning from its lowest level since April 2020. The XAUUSD has reached its highest in three weeks as  a result of the sustained rising momentum.

Weaker Greenback

The US Dollar continues to decline from the two-decade high hit last week, and it looks to be a key factor driving flows into dollar-denominated commodities.  US T-bond rates continued to decrease against the backdrop of US economic data showing that the Federal Reserve’s Federal funds rate hikes have started to hurt the economy as the US central bank strives to manage inflation.

US downbeat stats

Monday’s US economic data suggested that the country’s industrial sector is decreasing. Subcomponents of ISM surveys revealed a decline in new orders and an increase in pricing. The Department of Commerce stated that factory orders for August were constant during Tuesday’s session, after a 1% decrease in July. According to the Labor Department, employment possibilities in the United States decreased, but they remained high. According to the August US JOLTS data, vacancies fell from 11.239 million in July to 10.053 million in August.

Key Events to watch

Friday will see the publication of the monthly employment report for the United States. The highly publicized NFP report will have a substantial influence on the Fed’s future rate-hiking strategy. If the employment news is worse than expected, Gold will likely increase. If it is far stronger than expected, the market may reflect this, and the Fed may continue to hike rates.

What to look for around Gold?

The possibility of additional aggressive policy tightening by the world’s main central banks may act as a headwind for the non-yielding yellow metal, restricting its potential for further rises for the time being.  The year has been eventful for Gold as the US Dollar has been chosen as a safe haven, while treasury yield rates have played a significant role.  Any further swings in the metal will be primarily determined by US data, with this week’s jobs report having the potential to drive the metal back to its previous lows.

Technical Analysis: The upside momentum continues

XAUUSD is now trading at 1721.62, up 1.34% on the day. The pair is above its 20-day moving average on the daily chart, and the RSI is over 50. A drop below 1672.50 could push the pair down to the 1645.16 support level. If the pair falls below this level, it will find support at 1630.61. On the upside, the index could reach the next resistance level at 1728.94. A break over 1756.28 would open the door for a test of the next resistance level, 1801.56.

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