The gold price surpassed the important level of $1,800 on Thursday, closing the week at 1831.35. Notably, this was the first time for the precious metal to trade above this resistance-turn-support level since late February. The surge comes after it remained range-bound between 1766.35 and 1799.18 earlier in the week.
US jobs data
One of the factors that have offered support to gold prices in the past week is the lower-than-expected US jobs data. For instance, on Wednesday, April’s reading for ADP nonfarm employment change came in at 742,000 compared to the forecasted 800,000.
On Thursday, data from the US Department of Labor showed that the initial jobless claims in the previous week were 498,000. Analysts had expected a reading of 540,000, down from the prior week’s 590,000. However, the continuing jobless claims missed the estimates and remained higher than in the previous week. At 3,690,000, the figure is higher than the predicted 3,620,000 and the prior 3,653,000.
Notably, the lower-than-expected jobs data on Friday further fuelled the gold rally as the greenback dropped to its lowest level since 26th February. April’s US nonfarm payrolls came in at 266,000 compared to the expected 978,000. The number was also lower than March’s 770,000. Besides, at 218,000, private nonfarm payrolls missed the forecasted 893,000 and the prior month’s 708,000. April’s unemployment rate was also higher at 6.1%. Analysts have predicted a reading of 5.8%, 2 points lower than in March.
Janet Yellen’s comments on Tuesday revived the recurring talks on inflation. Investors and analysts alike saw 2021 as the year of recovery from the economic impacts of the coronavirus pandemic. The US has recorded strong economic data, raising concerns over the possible overheating of the economy.
However, the Federal Reserve has maintained that the recovery is still uneven and incomplete. According to the bank, the expected inflation will be transitory and does not warrant tightening its monetary policy. As such, it intends to hold on to its accommodative policy for a while longer.
On Tuesday, the Treasury Secretary stated that the Fed might need to start hiking interest rates to prevent the US economy from overheating. Granted, Yellen later downplayed her remarks by indicating that she does not see inflation being a looming problem. Nonetheless, her initial statement impacted the market. With regards to gold, the event increased the precious metal’s safe-haven demand.
US Treasury yields
The US bond yields have been another driver of the gold price rally in the past week. A decline in the yields acts as a bullish catalyst for the metal, which is considered a hedge against inflation.
In the past week, the benchmark 10-year US treasury yields dropped from 1.65 on Monday to an intraday low of 1.48 on Friday. A continuation of the downtrend in the coming week is likely to push the gold price higher.
Gold price technical outlook
A look at the price movements shows that $1,800 has been a key level over the past week and in the first quarter. In my opinion, it can shape the metal’s chart for the rest of the year.
On a weekly chart, the gold price is above the 25 and 50-day exponential moving averages. The indicators signal the continuation of the current uptrend.
In the coming week, I expect it to rise to around $1871.92. However, it may lack enough momentum to push past the trendline highlighted in black. Subsequently, it can pull back to around $1,800.
In the coming week or the next, more sellers in the market should push prices further down to 1746.31. While the precious metal’s uptrend is sustainable into the second half of the year, $1800 is likely to remain a key level in the short term.