Gold Outlook for Next Week: Three Major Events to Send Gold on a Rollercoaster. Bears Eyeing This Level, Bulls May Struggle to Turn the Tide?
Over the past week, gold has experienced increased volatility due to the Fed's hawkish stance, the Omicron variant, and economic data such as the non-farm payroll report. The week began with moderate bearish pressure on gold prices, resulting in declines on Monday and Tuesday. After a lackluster attempt to rebound towards $1800, gold struggled to maintain its position on Wednesday, reaching a one-month low of $1761. Although a disappointing November jobs report in the US on Friday (December 3rd) triggered a price rebound, gold failed to attract enough buyers, resulting in its third consecutive weekly decline.
Time:
2021-12-06 15:50
Over the past week, the Federal Reserve hawkish comments, the Omicron variant, and non-farm payroll economic data have increased volatility in gold. The week began with gold prices under moderate bearish pressure, closing lower on Monday and Tuesday. After a lackluster attempt to rebound towards $1800 USD , gold struggled to hold its ground on Wednesday, hitting a one-month low of $1761. Although a disappointing US November jobs report on Friday (December 3) triggered a rebound in gold prices, it failed to attract enough buyers, resulting in a third consecutive weekly decline.
What happened last week?
Before last weekend, safe-haven funds dominated the financial markets due to renewed concerns that Omicron could slow global economic activity. However, market sentiment improved early this week as Omicron cases in Europe and the UK showed mild symptoms. As a safe haven, gold found no demand, and US Treasury yields rose slightly.
On Tuesday, Moderna's CEO stated that current vaccines may be ineffective against the new variant, adding that "it will take pharmaceutical companies several months to mass-produce vaccines targeting the new variant," after which the market shifted back to risk aversion. Gold prices successfully staged a decisive rebound, climbing above $1800. However, hawkish remarks from Federal Open Market Committee Chairman Powell boosted the dollar and forced gold to give up its daily gains.
Testifying before the Senate Banking Committee, Powell said it would be appropriate to consider ending the asset reduction program a few months earlier. Regarding the Omicron variant, Powell said they needed to see more data to assess its potential impact on economic activity. Finally, Powell noted that it was time to drop the word "transitory" when defining US inflation.
On Wednesday, data from the US showed that ADP private sector employment increased by 534,000. In addition, the Institute for Supply Management (ISM) November manufacturing PMI reached 61.1, indicating that manufacturing activity continued to expand at a strong pace. The prices paid component in the PMI survey fell from 85.7 to 82.4.
In the absence of top-tier macroeconomic data releases, the dollar outperformed other currencies, and gold fell to its lowest level since early November at $1761. Meanwhile, Cleveland Fed President Mester said she supported faster tapering so the Fed could adjust policy more flexibly when needed. interest 。
did not seem to believe that the poor non-farm payroll data would alter the Fed's tapering outlook. The dollar index and benchmark 10-year US Treasury yields easily returned to pre-report levels after a conditioned reflex.
Next week's focus
The Federal Reserve will enter a quiet period on December 4 (Saturday), and we will not receive any comments from policymakers until December 16. However, market participants will closely monitor the development of the Omicron variant. On Friday, BioNTech CEO Ugur Sahin said: "We believe that people who have been vaccinated and boosted will have sufficient protection against serious illness." As long as investors remain confident that Omicron will not put significant strain on the healthcare system, even if vaccines need to be adjusted, the Fed may continue to tighten policy, which will limit gold's rebound attempts.
There will be no major economic data releases in the first half of next week, and risk perception may continue to drive financial markets.
The US Bureau of Labor Statistics will release the November Consumer Price Index (CPI) data on Friday. Annual core CPI is expected to fall slightly from 4.6% in October to 4.3%. When the October CPI data exceeded market expectations, gold surged in the initial reaction. We would see a similar reaction if the report shows that CPI continued to rise in November. However, strong inflation data would also boost the dollar, preventing gold from benefiting from the inflation data.
Gold's technical outlook
FXStreet wrote that gold closed above the 100-day and 200-day moving averages twice this week but failed to break through either level, indicating that sellers will continue to sell off as long as these resistance levels remain intact. In addition, the Relative Strength Index (RSI) indicator on the daily chart remains around 40, confirming the view that gold is struggling to build momentum for a rebound.
Downside, initial support is at $1750 (static level), with stronger support at $1760 (December 2 low). If the daily close falls below the former, it could lead to a further decline towards $1740.
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