Spot gold was up 0.2% at $1,418.25 per ounce as of 0401 GMT, rising nearly 0.7% so far this week.
U.S. gold futures were steady at $1,420.80 an ounce.
· “We have a key event tonight for the global economy that is U.S. non-farm payrolls numbers. If they come in weaker than expected, we will see confirmation of one of the key supports for gold that is lower interest rate environment,” said Michael McCarthy, chief market strategist, CMC Markets.
· All eyes are on the U.S. non-farm payrolls (NFP) data due later in the day, which economists expect to have risen by 160,000 in June, compared with a rise of 75,000 in May.
· The Fed holds its two-day policy meeting on July 30-31 and futures are fully pricing in a 25 basis point cut.
The Fed is not alone in embarking on easier monetary policy. Australia’s central bank has cut its cash rate by 50 basis points since June while leaving the door ajar for a third move this year.
· “Gold should do well coming out of NFP as one positive payroll print should not change the sense of urgency central banks around the world must feel,” said Stephen Innes, managing partner at Vanguard Markets.
Bullion has gained more than 12%, or $150, since touching its 2019 low of $1,265.85 in early May, driven by dovish outlook from major central banks and an escalation in tensions between the United States and Iran.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.
· The dollar index against a basket of six major currencies was relatively flat, having spent the previous day in a tight range as the U.S. financial markets were closed for the Independence Day holiday.
· On the technical side, spot gold may retest a resistance at $1,435 per ounce, with a good chance of breaking above this level and rising into a range of $1,443-$1,456, according to Reuters technical analyst Wang Tao.
· After a strong rally, gold can still see solid gains in Q3 with lower interest rates creating the perfect environment for the metal to prosper, FXTM said in the latest report.
“In a low-interest rate environment filled with chronic uncertainty, gold can climb another 5% over the course of Q3 - claiming the title as one of the high flyers among safe-haven assets, in competition with the Yen,” wrote FXTM research analyst Lukman Otunuga.
Gold might even have upside potential to challenge the $1,500 an ounce level if the $1,360 support level holds, the report added.
“For as long as bulls are able to defend $1,360, there should be enough confidence to challenge $1,430 and $1,500 – a level not seen since April 2013,” Otunuga explained.
Decelerating global growth will be a major boost for gold throughout the year with the World Bank’s downgraded 2.6% growth estimate weighing on the markets.
“If the recent disappointing PMI releases across the manufacturing sectors in Europe, China and the United States are anything to go by, global growth is moving towards the lower bound of 2% as the decade draws to a close,” the research analyst explained.
But nothing is a done deal, with FXTM warning that there are potential risks to their optimistic gold forecast, including easing trade tensions, recovery in global growth, and the Federal Reserve not cutting rates.
“A decline back below $1,360 will most likely swing open the doors towards $1324 and $1300, respectively. This bullish setup becomes invalidated if prices find comfort below $1,300,” Otunuga wrote. Will the U.S. central bank confirm market expectations and cut interest rates as early as July? If it fails to do so, Gold risks rapidly surrendering its second-quarter surge.”
· As expected, Thursday's market action didn't offer any trading opportunities as the thin trading volume forced major pair and commodities to stay stuck in tight ranges. The XAU/USD pair, which came within a touching distance of the multi-year highs that it set at $1439 in late June on Tuesday, was last seen consolidating this week's gains at $1415 losing 0.25% on the day.
Although the pair started the week under pressure amid the sharp rebound seen in the US Treasury bond yields, revived concerns over an economic slowdown following cautious remarks from ECB and BoE officials helped the precious metal gather strength against currencies.
Earlier this week, BoE Governor Carney adopted a cautious tone regarding the economic outlook and sent the UK government bond yields lower. Today, Germany's 10-year Treasury bond yield lost more than 5% and fell below the ECB's deposit rate of -0.4% for the first time to show that markets continue to lean towards safer assets and expect central banks to remain on the dovish side.
On Friday, the Nonfarm Payrolls Report published by the U.S. Bureau of Labor Statistics will be watched closely by the market participants. A strong rebound in the NFP and a higher-than-expected reading could cause markets to start doubting a Fed rate cut at the end of this month and help the greenback gather strength and vice versa.
· Among other precious metals, silver edged 0.1% lower to $15.27 per ounce, while platinum rose 0.3% to $835.15.
· Palladium was steady at $1,561.20 an ounce and was heading for its fifth straight weekly gain.
Reference: Kitco,FXStreet,CNBC
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