Gold price hovers near record highs ahead of US NFP report

• Gold’s rally propels it to an unprecedented $2,164.78, buoyed by expectations of easing policies from ECB and Fed.
• Despite ECB’s hawkish hold, Lagarde’s openness to June adjustments contrasts with rising US Treasury yields.
• Powell hints at easing, increasing June rate cut odds amid cooling US labor market signs.

Gold witnessed an extension of the incumbent rally, hitting an all-time high of $2,164.78 and remaining on the path toward $2,200. The US Dollar tumbled across the board as major central banks like the European Central Bank (ECB) and the Federal Reserve (Fed) prepare to ease policy.

On Thursday, the ECB decided to hold rates unchanged and delivered hawkish remarks led by the ECB President Christine Lagarde. Even though she prepared a possible policy adjustment, she disregarded a possible cut by the April meeting, though June looks possible.  Consequently, US Treasury yields rose, sparking a pullback in yellow metal prices.

Across the pond, Fed Chair Jerome Powell appeared at the US Congress and reiterated yesterday’s speech. He said they would adjust borrowing costs and added the Fed was “not far” from being able to ease policy. Although he pushed back against a cut in March, the window is open for June’s meeting. Odds for a quarter of a percent rate cut in that meeting increased.

Yields on US Treasuries tumbled throughout the week with the 10-year benchmark note rate at 4.116%, down six basis points. Besides that, soft US economic data suggests the economy isn’t faring as solidly as expected. Americans filing for unemployment claims rose as expected by 217K, though this suggests the labor market is cooling, a consequence of tighter policies. Going forward, the US Dollar will be guided by the US Nonfarm Payrolls (NFP) data for February, which will be published on Friday. 

Daily digest market movers: Gold price skyrockets as the Greenback tumbles

• The US Dollar Index tumbled 0.48% and is at 102.85, its lowest level since January 24. This is a tailwind for the non-yielding metal.
• The CME FedWatch Tool shows odds for a 25-basis-point rate cut in June are at 73%.
• On Wednesday, Minnesota Fed President Neel Kashkari said that he expects only one rate cut if it’s appropriate as economic data remains robust. He put into the table the chance of keeping rates unchanged through 2024.
• The Initial Jobless Claims for the week ending March 2 were 217K, surpassing estimates and the previous reading of 215K.
• The US Balance of Trade was $-67.4 billion, exceeding estimates of $-63.5 billion and higher than December’s $-64.2 billion.
• US economic data previously released during the week:
  • Private companies hired less than forecast but exceeded January’s reading at 111K as they added 140K jobs to the workforce, below estimates of 150K, according to ADP Employment Change report.
  • The US Job Openings and Labor Turnover Survey (JOLTS) for January showed that there were 8.863 million job openings, a figure that fell short of expectations and was marginally lower than the previous month’s report of 8.9 million and 8.889 million, respectively.
  • The S&P Global Services PMI experienced a slight decrease to 52.3, falling from January’s 52.5, while the Composite PMI, which includes both manufacturing and service sectors, registered at 53.8. This figure did not meet expectations and was lower than the previous reading of 54.2.
  • Additionally, the ISM Services PMI reported a decline to 52.6 from 53.4, coming in below the anticipated consensus of 53. This resulted in a negative impact on the US Dollar.
  • Factory Orders in January fell more than expected, from 0.2% to -3.6% MoM.
• On Monday, Atlanta Fed Bank President Raphael Bostic said a strong labor market and decent economic growth have bought time for the Federal Open Market Committee (FOMC) to decide on when rate cuts will be optimal. Bostic added that the Fed is having a “rebounding success” as inflation slowly returns to the desired target without hurting labor demand.

Technical analysis: Gold surges to all-time highs amid Powell’s comments

The Gold rally is extending past the psychological $2,150 mark and hit an ATH at $2,164.78. Even though the Relative Strength Index (RSI) suggests the uptrend is overextended, it makes it difficult for sellers to step in and push prices lower. On the other hand, buyers could step in, though they need a pullback toward the $2,150 area or the $2,100 mark, before targeting the $2,200 figure.

In another scenario, if XAU/USD drops below March’s 6 low of $2,123.80, that would pave the way for a correction toward $2,100. If that level is surpassed, the next support would be the December 28 high at $2,088.48 and the February 1 high at $2,065.60.