Gold rebounds strongly after dipping on lower-than-forecast rise in jobless claims
XAU/USD has rebounded as traders buy the dip after the release of Initial Jobless Claims data showed fewer Americans are signing on for unemployment benefit than experts had forecast, led to a spike lower. The pair is currently trading up on the day at $1,982. Gold price shot higher following the March FOMC meeting on Wednesday. The ore beloved of king Midas of Phrygia rose after the US Federal Reserve (Fed) suggested tighter credit conditions due to banking stress might do the job of bringing down inflation on its behalf. The Bank would, therefore, probably not have to raise rates as much as expected in the future.
Gold gained because the expectations of lower interest rates are viewed as bullish for the metal since it doesn’t yield holders a return unlike cash (deposits) or cash equivalents. XAU/USD dipped lower after the release of stronger-than-forecast labour market data, on Thursday. Initial Jobless Claims data for the week ending March 17, showed a lower-than-expected rise in the number of Americans claiming unemployment benefits to 1.694M versus the 1.701M forecast. The data suggests the labour market is stronger than economists anticipated, which could mean upwards pressure on inflation, and the possibility the Federal Reserve may have to raise rates more aggressively than the dovish interpretation of Wednesday's FOMC might suggest. At its FOMC meeting on Wednesday, March 22, the US Federal Reserve increased the Fed Funds Rate a quarter of a percent to a target range of 4.75%-5.00%, in line with market expectations, raising the base interest rate at which banks lend to each other.
Since ‘the trend is your friend’, the probabilities support a continuation higher, with a break above the $1,984 highs of the previous bar confirming an extension. The underside of the just-broken trendline is likely to present an initial target and resistance at $1,991 and the Gold price will probably pullback at that level, however, an eventual rally all the way to the yearly highs at $2,009 is quite possible. On the other side, if Gold bulls fail to sustain at higher levels, any retracements could prod the intraday low at $1,965, below which the static support at $1,960 will be threatened. Deeper declines will expose the $1,950 demand area, opening floors for a test of the falling trendline support at $1,926.
Since ‘the trend is your friend’, the probabilities support a continuation higher, with a break above the $1,984 highs of the previous bar confirming an extension. The underside of the just-broken trendline is likely to present an initial target and resistance at $1,991 and the Gold price will probably pullback at that level, however, an eventual rally all the way to the yearly highs at $2,009 is quite possible. On the other side, if Gold bulls fail to sustain at higher levels, any retracements could prod the intraday low at $1,965, below which the static support at $1,960 will be threatened. Deeper declines will expose the $1,950 demand area, opening floors for a test of the falling trendline support at $1,926.