On Friday, the precious yellow metal wavered as the US Dollar Index ignited from the bullish divergence and surged +0.85% to 91.32, which has put a somewhat bearish sentiment on spot gold.
U.S. Treasury Secretary Janet Yellen on Sunday tamped down concerns that President Joe Biden’s plans for infrastructure, jobs and families will cause inflation, saying the spending will be phased in over a decade.
Meanwhile, U.S. Federal Reserve speakers will also be important after Fed Chairman Jerome Powell said in the past week that the central bank is still looking for “substantial further progress” in its goals for the economy.
The chairman emphasized that the Fed is not close to tapering back its bond-buying program, a surprise to some investors.
Some bond market pros had expected the Fed to start discussing cutting back purchases at its June meeting and begin to reduce its $120 billion monthly bond-buying by the end of the year or early next year.
Just days after Powell’s comments on tapering, Dallas Fed President Rob Kaplan on Friday said the Fed should begin the discussion on paring back bond purchases because imbalances in financial markets and the economy are improving faster than expected.
The market’s focus on the Fed’s bond program makes the jobs report even more important.
If the central bank starts to taper back those asset purchases, it will then signal it would be on the path toward raising interest rates.
Most economists do not expect the Fed to raise interest rates before 2023.
This Friday, traders will focus on the jobs report from the U.S., which will provide insights into the state of recovery of the labour market.
The Non-Farm Employment Change forecast is seen for a rise of 975,000, with the previous release at 916,000, while the Unemployment Rate forecast at 5.7%, with the last release at 6.0%.
From the technical standpoint, the downside target holds to a trajectory of $1,746-48. Reassess from there.
The recently suggested target at $1,802-08 now serves as a near-term cap.