Forex world

December 02, 2022

XAU/USD slides to $1,780

- Gold price retreats sharply from a multi-month top in reaction to upbeat US jobs data.

- Rising US Treasury bond yields prompt aggressive US Dollar short-covering and weigh.

- The risk-off impulse fails to impress bulls or lend support to the safe-haven XAU/USD.

Gold price struggles to find acceptance above a technically significant 200-day Simple Moving Average (SMA) and retreats from a nearly four-month high touched earlier this Friday. The intraday downtick picks up pace in reaction to the upbeat US jobs report and drags the XAU/USD to sub-$1,780 levels during the early North American session.

US employment details beat market expectations

The closely-watched Nonfarm Payrolls (NFP) from the United States showed that the economy added 263K new jobs in November, beating consensus estimates pointing to a reading of 200K. Adding to this, the previous month's print was also revised higher to show an addition of 284K vacancies as compared to the 261K reported originally. Meanwhile, the unemployment rate held steady at 3.7% during the reported month, as was anticipated.

Aggressive US Dollar short-covering weighs on Gold price

Additional details of the report showed that Average Hourly Earnings grew 0.6% in November and 5.1% YoY rate, suggesting a further rise in inflationary pressures. The data validates Federal Reserve Chair Jerome Powell's forecast that the peak rate will be higher than expected, which triggers a sharp rise in the US Treasury bond yields. This, in turn, prompts an aggressive US Dollar short-covering move and weighs heavily on the Dollar-denominated Gold price.

Risk-off impulse fails to lend support to safe-haven XAU/USD

Traders, meanwhile, seem rather unaffected by a sell-off in the equity markets, which tends to drive flows towards the safe-haven precious metal. Nevertheless, Gold price, for now, seems to have snapped four days of the winning streak, though remains on track to post strong weekly gains. Hence, it will be prudent to wait for strong follow-through selling before confirming that the XAU/USD has topped out and positioning for a deeper corrective pullback.

Gold price technical outlook

From a technical perspective, failure to find acceptance above the very important 200-day SMA and the subsequent downfall could be seen as the first sign of bullish exhaustion. That said, any further decline is likely to find some support near the $1,770 horizontal zone. A convincing break below should pave the way for a fall towards the next relevant support near the $1,755-$1,753 region.

On the flip side, the $1,800 round-figure mark now seems to act as an immediate hurdle ahead of the multi-month top, around the $1,804-$1,805 region. This is closely followed by the August 2022 swing high, around the $1,808 area, above which Gold price could climb to the $1,820 resistance zone.

Key levels to watch


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