Gold weekly outlook: Central Bank speakers and NFP in focus

This weekly gold outlook analysis article was written before the markets closed on Friday. The precious metal had managed a two-day rally, albeit it was still on course to end lower for the fourth consecutive week. Looking ahead, we have key US jobs report in a shortened trading week to look forward to, as well as some central bank commentary. Overall, gold remains under pressure amid a strong macro environment for the US dollar.

 

Why has gold been falling?

 

With the Federal Reserve’s monetary policy outlook under the new chairman supporting the dollar, this has been among the reasons why gold has fallen in recent weeks. That’s not to mention the impact of fading haven demand amid the de-escalation of the Middle East tensions, and the loss of prior speculative bullish moment. But much of the recent weakness reflects expectations that the Fed will keep interest rates on a hawkish path. If the FOMC’s policymakers are ultimately forced to resume tightening and deliver more hikes instead of one or two expected, the downside for gold could become far more pronounced.

 

Central bank speeches and NFP jobs report among macro highlights in week ahead

 

Heads of major central banks - including the Fed, ECB and BoE - are due to participate in a panel discussion titled "Policy panel" at the ECB Forum on Central Banking, in Sintra. Among these, watch out for fresh comments from Fed’s Warsh after he shook the markets with his first policy meeting earlier in June. If he maintains a hawkish rhetoric, this could certainly weigh on gold. However other central bank heads might be more dovish given the oil price slump. If so, their comments could potentially provide some counterbalance.

 

Meanwhile, US data will take centre stage with a dump on Thursday, ahead of the holiday on Friday for US investors. After three consecutive monthly job beats and the much hawkish Fed policy meeting, incoming data will be watched closely - in particular inflation and employment data. Released a day earlier than usual due to US Independence Day holiday, the key non-farm payrolls jobs and wages figures could set the tone for FX, gold and indices on Thursday.

 

Technical gold outlook and key levels to watch

 

Gold attempted to recover on Friday, extending the gains from the previous session as it climbed back above the $4,000 level to reach the March low of $4,098, where it was trading at the time of writing. That level previously acted as support but could now turn into resistance given the recent bearish price action.

 

 

Indeed, with gold spot prices remaining well below its 200-day moving average, which now sits above the declining 21-day exponential moving average, the path of least resistance objectively remains to the downside.

 

As things stand, we could see further losses, with the first downside target being the liquidity resting below the recent low of $3,916.

 

Below that, there are no significant support levels until the psychological round-number handles at $3,900, $3,800, and beyond.

 

On the upside, if gold manages to break above the March low of $4,098 decisively, then $4,170 could become the next area of resistance, followed by the $4,300 level, where the broken bullish trendline comes into focus.

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R