Gold prices are retreating from their previous levels today as traders take very calculated risks ahead of the most important economic event, which will unfold later this week. So far, the precious metal appears to be following an upward sloping path of least resistance, characterized by more gradual moves. Prices of the yellow metal are more likely to stabilize ahead of this event, as investors seek more clarity before going big.


Gold prices are down about 1% today, giving up most of their gains from yesterday as investors continue to digest mixed messages from Fed members. Over the past few weeks, we have received mixed messages from FOMC members, some of whom have suggested that further rate hikes are not imminent. These eagle-eyed members are constantly arguing that inflation is rampant in the country and it is acting very stubbornly. These hawkish members maintain their belief that it could take a year for inflation to reach the Fed’s target level of 2%, and that if the Fed’s goal is to reach that level earlier than expected, they would need another rate hike. may need to be considered. His comments are sure to make gold traders more cautious, who are thinking that the only way for the gold price with minimal resistance is to move higher as the Fed cuts rates a lot. is bound to

However, the Federal Reserve chairman has not indicated that another interest rate hike is urgently needed, and in his latest commentary, he tried to send that message between the lines to traders. Investors are aware that the US economy is strong, which indicates that the risk of a hard landing, which many economists are advising against, is minimal. However, there is a counterargument, bolstered by U.S. labor data, which points to a slowdown in the U.S. job market. In this context, the report coming on Friday is very important.

Goldilocks scenario for gold

On Friday, we have the most important economic report coming, which will not only dictate the day’s trading but also set the trend for the rest of the month. The report that traders are eagerly awaiting is the US NFP data, and expectations for this report are 189K, compared to the previous figure of 175K.

Now, the Goldlock scenario for the yellow metal would be if the report comes in softer than expected. Traders will then expect the Fed to start cutting rates sooner rather than later, as confidence in the strength of the US labor market will make keeping rates high no longer sustainable. Conversely, if economic data exceeds expectations, it suggests that the Fed will extend its rate hike policy, potentially leading to an economic downturn. This may prompt traders to repurchase gold as a risk hedge. Another scenario, which is not a Goldilocks scenario, is that if a bullish report or a strong report leads to significant gains that the Fed is right to maintain policy and the dollar gains steam, then gold The price falls.

Price action

In all scenarios, there are several key levels that traders need to be aware of. First, monitor the 100- and 50-day simple moving averages for price action. If the price continues to trade above them, it will be an extremely bullish signal, which means that the price is more likely to move towards the red line, the resistance zone. However, if the price breaks below the 100- and 50-day simple moving averages, we are more likely to see a correction, which could push the price towards the support zone — shown by the green horizontal line.

Gold Chart by Multibank

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