The Gold Spot Price (XAUUSD) is on track to close a second week in negative territory after two days of back-to-back losses. The U.S. ADP Employment Change surprised to the upside of expectations, surging to 324K, nearly twice what was expected. The probability of a Fed Rate hike in September subsequently edged higher, boosting the Greenback, which rose to a four-week peak at the expense of the non-yielding yellow metal.
The week ahead still has key events that traders will be highly anticipating, with the U.S. releasing its PMIs, which will give insight into the state of the services and manufacturing sectors. In addition, the U.S. Nonfarm Payrolls will likely be the highlight of the week as traders ascertain whether the labour market will force the hand of the Federal Reserve in light of the strong nonfarm private employment data presented in the ADP.
Technical
The Gold Spot price has recently succumbed to downside pressures following the rejection of the 61.80% Fibonacci Retracement Golden Ratio and the breakthrough below the 100-day moving average. The high volume breakdown below the support level at 1942.53 per ounce validated that the spot price is undergoing downside momentum. The 1942.53 level now forms a resistance level, while the 1902.71 per ounce level established a major support level.
Given that downside momentum is taking precedence, the 1902.71 per ounce level could come into play if the release of U.S. economic data supports the Greenback with a stronger likelihood of future rate hikes. In contrast, with the Relative Strength Index pointing to oversold levels, a reversal could take place. The 1942.53 per ounce level will likely be earmarked as a level of significance to the upside by optimistic yellow metal traders.
Summary
The key driver of the Gold Spot Price will likely be the release of the U.S. Nonfarm Payroll. Given that the ADP employment change surprised to the upside of consensus, the market will likely have all eyes on the NFP as they determine if more rate hikes are likely. The 1942.53 per ounce level will probably be crucial in pivoting between bulls and bears.
Sources: Automatic Data Processing, Inc., CME, Reuters, TradingView
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