Gold Breaking Out

Gold prices are enjoying a fresh wave of demand on the back of a string of recent US data undershoots. On Friday, US ISM manufacturing came in well-below forecasts at 47.8 vs 49.5 expected, down from 49.1 previous. Consumer sentiment was also seen tumbling to 76.9 from 79.6 prior and expected. On the back of a sharply lower retail sales print earlier in the week, the data struck a further blow against the US Dollar, allowing gold room to push higher.

Fed Expectations

The Fed has reaffirmed its message that it remains willing to keep rates in restrictive territory as long as needed to push inflation down. However, with data seemingly hitting a rough patch over the last month, traders perhaps sense this tone might shift if incoming data continues to weaken. Fears of a US soft-patch might be enough to see the Fed bringing initial rate cuts forward this year, which should further pressure the Dollar, supporting gold near-term.

US Jobs Data Due

Looking ahead this week, focus will be on Fed chairman Powell’s semi-annual testimony at Congress as well as the headline event on Friday, the latest US labour reports. On the back of recent data undershoots traders are keen to see whether the jobs market (which has been very robust in recent months) has suffered at all. If we see any downside in Friday’s data, this will likely be heavily bearish for USD, pushing the gold rally up higher.

Technical Views

Gold

The rally in gold prices has seen the market breaking back above the bull trend line, now testing above the 2069.41 level too. With momentum studies bullish, the focus is on a further push higher while above this level with the all-time highs around 2149.72  the next level to note.