As the trading day unfolds, the Gold price confidently confronts the proximity of three-week highs, hovering around the vicinity of $1,940. The course of its further ascendancy, however, hinges upon the imminent top-tier US Automatic Data Processing (ADP) employment data, particularly in light of the recent disappointment emanating from the JOLTS Job Openings data reported on Tuesday.
Possible Implications of US ADP Jobs Data: A Prelude to Renewed Dovish Fed Sentiments?
The optimism permeating the Asian trading arena is reflective of the robust surge on Wall Street during the previous night, which reignites anticipations of an extended pause in US Federal Reserve (Fed) rate hikes this year. This sentiment is further magnified by the news that Chinese state-owned lenders intend to curtail rates on the majority of outstanding mortgages and deposits across the nation, thereby fueling the overarching optimism. Under the aegis of this risk-on climate, the US Dollar grapples with its nascent revival, aligning with the reinvigorated US Treasury bond yields. This conjuncture provides the Gold buyers with the fortitude to sustain their position at the echelons of multi-week highs.
The current juncture witnesses traders adopting a circumspect stance, abstaining from definitive wagering on the trajectory of the US Dollar or the Gold price. This transient uncertainty can be attributed to the imminent release of top-tier US Automatic Data Processing (ADP) Employment Change data. The forthcoming data is anticipated to elucidate that the US private sector appended 195,000 jobs during August, indicating a decline from the previous month’s figure of 324,000 job additions in July.
In the event that the US ADP jobs data significantly surpasses expectations, the resulting surge would extinguish any lingering hopes of an additional Fed rate hike within the year, thereby catalyzing a novel wave of US Dollar depreciation. A coherent consequence of such a scenario would be the consequential plummeting of US Treasury bond yields. Within this framework, the Gold price would rally to challenge the formidable $1,950 psychological threshold. However, if the US jobs data endeavors to catch the market off-guard by surpassing optimistic forecasts, it would rekindle the momentum of the US Dollar, at the expense of the Gold price.
Beyond the domain of US employment data, Gold traders remain attuned to the secondary evaluation of the second-quarter (Q2) Gross Domestic Product (GDP) and the Pending Home Sales report, in search of novel trading stimuli. The prevailing market sentiment implies an 87% probability that the Fed will maintain its current stance in the forthcoming meeting, as indicated by the CME FedWatch tool. Furthermore, market dynamics illustrate an escalating probability of an additional pause at the November meeting, with the odds surging to 53%, a noteworthy escalation from the 38% odds registered merely a day prior.
The foundation for a Fed pause has gained considerable prominence in the wake of a slew of underwhelming US statistics disclosed on Tuesday. The revelation of a steep decline in US JOLTS Job Openings to 8.827 million in July, a statistic not witnessed in over two years, stands in stark contrast to the preceding tally of 9.165 million recorded in June. Additionally, a pronounced drop in US Consumer Confidence to 106.1 for August, following two consecutive months of improvement, has surfaced as a result of renewed concerns surrounding inflation, a Conference Board survey released on Tuesday has illustrated.
Technical Assessment of Gold Price
The robust trajectory etched by the Gold Price is exemplified by its triumphant conquest of significant Daily Moving Averages (DMA), propelling it to the pinnacle of three-week highs. The shift towards an optimistic trajectory is further validated by the transformation of the 14-day Relative Strength Index (RSI) indicator on the daily chart.
The pivotal episode of a daily closing above the critical 50 DMA at $1,930, recorded on Tuesday, has paved the way for the prospect of revisiting the summit of August 7 at $1,947. This trailblazing ascent is poised to subject the psychological fortification of $1,950 to rigorous examination.
The attainment of transcendence above the aforementioned threshold of $1,950 assumes a role of paramount significance, as it would act as a springboard for the initiation of further upwards momentum, propelling the Gold Price towards the 100 DMA currently descending at $1,956.
Conversely, in the realm of potential downtrends, the immediate buffer is manifested at the 50 DMA resistance-turned-support at $1,930. A breach below this level would thrust Gold sellers into action, directing their efforts towards the robust support bedecked around the $1,913 level. This juncture signifies the convergence of the 21 and 200 DMAs.
In the event that the current bearish momentum amplifies, Gold sellers will set their sights on the nadir of the ongoing week, defined by the $1,904 threshold.