Gold price remains depressed as USD extends post-NFP gains to hit two-month peak

• Gold price drifts lower for the second straight day amid reduced bets for aggressive Fed easing.
• Rising US bond yields lifted the USD to a nearly two-month high and undermined the XAU/USD.
• Geopolitical risks and China’s economic woes could lend support to the safe-haven commodity.

Gold price (XAU/USD) remains under some selling pressure for the second successive day on Monday and seems vulnerable to extending last week’s retracement slide from the $2,065 area, or a one-month peak. Friday’s blockbuster US jobs report reaffirmed market expectations that the Federal Reserve (Fed) will keep interest rates higher for longer, which remains supportive of rising US Treasury bond yields and lifts the US Dollar (USD) to its highest level since December 11. This, in turn, is seen as a key factor undermining the non-yielding yellow metal.

Apart from this, the underlying bullish tone across the global equity markets further contributes to the offered tone surrounding the Gold price. That said, the risk of a further escalation of military action in the Middle East and persistent worries about a slowdown in China lend support to the safe-haven XAU/USD, warranting some caution for bearish traders. Traders now look to the release of the US ISM Services PMI, which, along with the US bond yields, the USD price dynamics and the broader risk sentiment, should provide some impetus to the metal.

Daily Digest Market Movers: Gold price adds to post-NFP losses as US Dollar climbs to a near two-month peak

• The robust US employment details released on Friday forced investors to scale back their expectations regarding the timing and pace of rate cuts by the Federal Reserve, which is seen weighing on the Gold price.
• The headline NFP showed that the US economy added 353K new jobs in January, nearly double the 180K anticipated, and the previous month’s reading was also revised higher to 333K from the 216K reported.
• Other details revealed that the Unemployment Rate held steady at 3.7% and wage inflation, as measured by the change in Average Hourly Earnings, rose to 4.5% on a yearly basis as against the 4.1% rise anticipated.
• The probability of a rate cut in March dwindled to approximately 15% from over 65% last month, while the likelihood of a 150-bps rate cut in 2024 has also plummeted to just 25% from being nearly certain previously.
• The yield on the benchmark 10-year US government bond extends the post-NFP rise beyond the 4.0% threshold during the Asian trading hours on Monday and pushes the US Dollar to a fresh high since December.
• A private survey showed that business activity in China’s services sector remained in expansionary territory for 13 straight months, though grew less than expected in January and added to worries about a slowdown.
• Israel’s Prime Minister Benjamin Netanyahu said that the country will not end the war before it completes all of its goals, while media reports suggest that Hamas is set to reject the Gaza ceasefire deal proposed in Paris.
• US Central Command said forces conducted a strike in self-defense against a Houthi land attack cruise missile and struck four anti-ship cruise missiles prepared to launch against ships in the Red Sea.
• This, in turn, could act as a tailwind for the safe-haven precious metal as traders now look to the release of the US ISM Services PMI for short-term opportunities later during the early North American session on Monday.

Technical Analysis: Gold price seems vulnerable to slide further while below the $2,054-2,055 hurdle

From a technical perspective, acceptance below the 50-day Simple Moving Average and a subsequent slide below Friday’s swing low, around the $2,028-2,027 region, could drag the Gold price to the $2,012-2,010 area. This is followed by the $2,000 psychological mark, which if broken decisively might shift the bias in favour of bearish traders and expose the 100-day SMA support near the $1,983-1,982 region. The XAU/USD could eventually drop to challenge the very important 200-day SMA, near the $1,965 area.

On the flip side, momentum beyond the Asian session peak, around the $2,042 region, is likely to confront a stiff hurdle near the $2,054-2,055 zone ahead of the $2,065 area or last week’s swing high. Given that oscillators on the daily chart are just holding in the positive territory, some follow-through buying has the potential to lift the Gold price towards the $2,078-2,079 region, or the YTD peak set in January. The subsequent move-up should allow the XAU/USD to reclaim the $2,100 mark and climb further to $2,020 resistance.