Gold – XAU/USD Analysis – June 07, 2021

Bearish Engulfing to Drive Sell!

Gold was closed at $1892.00 after placing a high of $1899.00 and a low of $1855.60. Gold reversed its course at the ending day of the week and recovered most of its losses from the previous day. The precious metal was under heavy pressure on Thursday amid the strong comeback of the U.S. dollar after a better-than-expected U.S. macroeconomic data release. However, on Friday, after extended its decline to near the $1865 level, gold reversed its movement and recovered most of the previous day's losses.

The U.S. dollar was weak on Friday as the U.S. Dollar Index reached the $90.03 level from its previous day's 90.5 level. The U.S. Treasury yields on benchmark 10-year note also fell to its 7-days lowest level at 1.55% from Thursday's 1.63% and weighed heavily on the greenback. The weakness in the U.S. dollar could be attributed to the mixed U.S. economic data for the day. The U.S. Labor Department revealed that only 559K jobs were created last month, adding weight to the greenback. This was the highly anticipated report, and when it came in short of expectations, the currency came under pressure that pushed gold higher.

At 17:30 GMT, the Average Hourly Earnings rose to 0.5% against the expected 0.2% and supported the U.S. dollar and further capped gains in gold. The Non-Farm Employment Change also dropped to 559K against the expected 645K and weighed on the U.S. dollar, and added further gains in the yellow metal. The Unemployment Rate from May was reported as 5.8% against the projected 5.9% and supported the U.S. dollar and limited the rising prices of the yellow metal. At 19:00 GMT, the Factory Orders from April dropped to -0.6% against the projected -0.3% and weighed on the U.S. dollar and pushed gold higher.

Meanwhile, on Friday, the Chairman of the U.S. Federal Reserve, Jerome Powell, said that the central bank has no objective to set the U.S. climate change policy as the issue currently has no influence over the monetary policy. He added that climate change was not something that the central bank considers while setting the monetary policy. He said that central banks could play a crucial role in building analysis to quantify the risks, but they were not climate policymakers or had no intentions.

However, these remarks were the opposite of central banks from Europe and China, who have joined the approach to influence climate policy by adding green bonds to their holdings of assets. Fed has also joined the network for greening the financial system, but it has also been under criticism from Republicans. Powell emphasized that the Fed's mandate was to ensure maximum employment and stable prices, and the issues related to climate change were beyond its authorization. The comments from Powell added further weight to the U.S. dollar and supported the prices of precious metal.

The U.S. dollar also came under pressure after a report from the White House released on Friday suggested that President Joe Biden has rejected the latest counterproposal for an infrastructure deal from Republicans. However, the negotiations will continue next week between Joe Biden and the Republican's lead negotiator Senator Shelly Moore Capito. The new plan included an extra $50 billion in spending across the number of infrastructure programs. However, the U.S. President appreciated her efforts and goodwill, indicating that the offer did not comply with his goals and objectives related to economic growth, new job creations, and climate change.

Gold Intraday Technical Level

Support Resistance

1855.90 1901.50

1838.50 1929.70

1810.30 1947.10

Pivot Point: 1884.10

Gold - XAU/USD - Technical Outlook

Gold is trading with a bearish bias at 1,885 levels, and it's facing immediate resistance at 1,895 areas. On the 4 hour timeframe, the yellow metal has violated the upward channel, and the closing of candles below this channel is boosting bearish sentiments among the investors. On the 4 hour timeframe, the closing of Doji and bearish Engulfing pattern indicates odds of bearish trend continuation in gold. Therefore, the selling trend dominates in gold today, and its next support prevails at the 1,873 level. Gold's resistance area stays at 1,895 and 1,904 levels today. Bearish bias dominates amid bearish technical indicators. All the best!