- Strong NFP report pushes gold lower on Fed hike bets
- Israel-Iran ceasefire headlines do little to offer support
- US inflation data could further strengthen the Fed tightening case
- Technical outlook remains bearish, with next support at $4,100
fell sharply on Friday, as the astoundingly strong bolstered expectations that the Fed may need to raise before the turn of the year. The precious metal tumbled from slightly below the key $4,500 zone, broke below the 200-day exponential moving average (EMA), and dipped its toe below the March 26 low of $4,345.
Although headlines about an Israel-Iran ceasefire have been circulating since Monday, the metal failed to establish a meaningful recovery as the opportunity cost for holding it remained elevated. On Wednesday, the US data is expected to reveal further acceleration in inflation, which could further solidify the notion of a Fed rate hike by December.
According to Fed funds futures, a 25bps rate hike is penciled in for December while the probability of it being delivered in September is nearly 50%. Thus, another set of worrisome inflation prints could increase the September hike probability and perhaps drive Treasury yields and the higher. This translates into downside risks for gold.
If the metal stays below $4,345 and the data encourage the bears to recharge, a fresh decline towards the March 23 low at $4,100 may be possible. The next stop may be the psychological round figure of $4,000, which acted as support back on November 17 and 18.
The case of further declines is also supported by the RSI and the MACD, both of which detect bearish momentum. The RSI lies below 50, slightly above its 30 line, while the MACD is running below both its zero and trigger lines.
On the upside, a rebound above the crossroads of the $4,600 level and the 50- and 100-day EMAs could shift the outlook back to neutral, while a recovery and a clear close above $4,770 could suggest a bullish picture.
