Gold – XAU/USD Analysis - May 07, 2021

U.S. Non-Farm Payroll in Highlights

Gold prices were closed at $1815.15 after placing a high of $1818.25 and a low of $1781.90. Gold prices extended their gains and rebounded strongly on Thursday to reach their highest level since February 16.

Gold rose about 1.8% on Thursday amid a weaker dollar and easing Treasury yields and reached above the $1800 level once again. The U.S. Dollar Index fell about 0.4% on Thursday and went below 91 levels to 90.87, and weighed on the greenback that pushed gold prices higher. The U.S. Treasury yields on a 10-year note continued their bearish momentum for the 6th consecutive session and settled at 1.557%, pushing the demand for non-yielding bullion higher.

Gold prices rose amid inflation fears as Federal Reserve policymakers have shown no interest in reducing their accommodative stance despite the economic optimism and the rising inflation fears were supporting yellow metal. The Federal Reserve has said that it will keep borrowing costs near 0% and maintain monthly asset purchases worth $120 billion until it sees substantial further progress towards full employment and its 2% flexible inflation target.

On the data front, at 16:30 GMT, the Challenger Job Cuts for the year came in as -96.6%. Last week, the Unemployment Claims were reduced to 498K against the expected 540K and supported the U.S. dollar that caped upside momentum in gold. The Prelim Nonfarm Productivity for the quarter rose to 5.4% against the forecasted 4.3% and weighed on the U.S. dollar and added strength in rising yellow metal prices. Prelim Unit Labor Cost for the quarter surged to -0.3% against the forecasted -1.1% and supported the U.S. dollar that limited the gains in gold.

On Thursday, the New York Fed Bank President John Williams said that the Federal Reserve's bond-buying did not appear to be creating imbalances in the financial sector. William noted that the positive impact of bond buying in lowering long-term borrowing costs could become more critical. Williams added that the U.S. gross domestic product is expected to increase by around 7% this year after adjusting for inflation that would bring in the fastest growth since the early 1980s. However, the boom might not be enough to achieve the dual mandate of the Federal Reserve for inflation and maximum employment. Meanwhile, the Atlanta Fed Bank President Raphael Bostic said on Thursday that a million or more jobs were likely created in April, but that would not be enough to push the Federal Reserve to begin discussing whether to pare its $120 billion in monthly asset purchases.

Furthermore, a new analysis from the University of Washington's Institute for Health Metrics and Evaluation (IHME) estimated that the coronavirus pandemic had caused nearly 6.9 million deaths worldwide, which is more than double the number officially recorded. The analysis estimated that the coronavirus had generated about 905,000 deaths in the United States, whereas; the official figures from the U.S. Centers for Disease Control and Prevention estimated 575,491 deaths by COVID-19. This report raised the appeal for safe-haven and pushed yellow metal prices on Thursday.

Gold Intraday Technical Level

Support Resistance

1791.95 1828.30

1768.75 1841.45

1755.60 1864.65

Pivot Point: 1805.10

Gold - XAU/USD - Technical Outlook

The precious metal gold trading with a solid bullish bias at 1,818 level faces immediate resistance at 1,830. On the 4-hour timeframe, gold has violated the ascending triangle pattern that's driving a sharp bullish trend in gold. On the downside, gold's support stays at 1,809 and 1,797 levels, along with resistance at 1,830 and 1,841 levels. The 20 & 50 periods EMA are suggesting an upward trend in the market. Technical indicators like the RSI and MACD exhibit bullish bias as their values hold in a buy zone. Later today, the investor's focus will stay on the U.S. NFP figures. Typically, this economic data from the U.S. drive dramatic price action in the U.S. dollar and gold. Economists are expecting Non-Farm Employment Change to soar to 990K vs. 916K beforehand. While the Unemployment rate is forecasted to drop from 6% to 5.8%, such results support the U.S. dollar and drive a bearish trend in gold. All the best!