Technical analysis of Gold
The fall in gold prices in the past 24 hours was mainly driven by the rise in the US dollar and short-term US bond yields. Gold trends are more sensitive to the direction of the US dollar and bond interest rates, especially when these two assets fluctuate in the same direction. The yield on the US 2-year treasury note continued to recover from the market slump triggered by the new variant of the new crown strain Omicron at the end of last month.
During wall street trading hours on Thursday, several fed officials reiterated that the central bank may be more hawkish. US Atlanta fed president Raphael Bostic said that policy will be guided by data. At the same time, San Francisco fed chairman Mary Daly stated that the fed may need to reduce the pace of asset purchases faster than expected.
Therefore, the trend of gold turned to this Friday’s non-agricultural employment report. The strong employment report, especially if average hourly wages unexpectedly rise, is expected to further boost market expectations for the fed hawkish monetary policy stance. This may push the US dollar and short-term US treasury yields to rise together, which will be negative for gold and increase the risk of market volatility in the next 24 hours.
On the 4-hour chart, since the short-term top was built in mid-November, the price of gold is still in a recent downtrend. The 20 and 50 period simple moving average (SMA) has been guiding the decline in the price of gold. If the price of gold reverses and rises, I expect these moving averages may play a certain role in resistance. The bullish divergence of the RSI indicator suggests that the next action is fading, and sometimes this sign indicates the possibility of a reversal upwards. Conversely, if the downward trend recovers, then the bottom will focus on the lows since September.