Gold Ready to Break 1-year Highs Amid Dollar Weakness

Gold is rallying on Wednesday amid dollar weakness. Silver is also on the positive note. All eyes focused on Nonfarm payrolls.
Mauricio Carrillo
Gold Ready to Break 1-year Highs Amid Dollar Weakness
Gold Ready to Break 1-year Highs Amid Dollar Weakness

Gold is extending its rally on Wednesday as investors are leaving behind the US Dollar and betting on the yellow metal amid speculations of a rate cut by the Federal Reserve. All eyes focus now on the US employment report.

The dominant theme this week is the dollar weakness that is driving the DXY index down for the fourth day in a row to trade below the 97.00 area at lows since April 15. In the last four days, DXY has lost 1.5% from 98.20 to current 96.75.

Dollar weakness is benefiting gold and other precious metals.

Precious metals round-up

XAU/USD is trading positive on the day as it jumped to highest since February 21 at 1,3340. It is now heading to the critical 1,350 area.

Silver is extending gains after reversing losses and posting gains on Tuesday. On Monday, XAG/USD is breaking above the 200-day moving average at 14.90 to trade at highs since the first week of May.

Copper is trading negative on Wednesday after the pair stopped two days of gains. The unit got a rejection at 2.669, and the pair was sent to current levels at 2.6440.

Platinum completes consolidation and performs another jump on Wednesday. This time XPT/USD rallied to break above 200-day moving average at 829.06 and trade above 833.00, highs since May 17.

Palladium remains trading sideways between 1,310 and the 50-day moving average which is now at 1,370. Technical conditions are mixed.

Nonfarm Payrolls to take the scene and determine the fate of dollar… and metals

As every first week of each month, traders are focusing and deciding its movements depending on the US employment report and its essential nonfarm payrolls number.

This time, the market is expecting 185K new jobs created in May in the United States, a slowdown from the 263K new jobs created in April, but indeed a good number.

Also, the eyes will be at the weekly earnings and wages; market is anticipating 3.2% increase in the average hourly earnings. Both numbers will be vital for dollar, and gold, for instance, as it will provide the Federal Reserve with reasons for a soon interest rate cut or not.

Gold ready to break 1-year highs at 1,346

XAUUSD daily chart June 5

The yellow metal is rallying on Wednesday after a brief period of consolidation performed on Tuesday. Gold is trading positive for the sixth day in a row, over 5% of gains since May 30.

Currently, XAU/USD is trading 1.35% positive on the day as the unit is moving at 1,343. Earlier in the day, gold broke above the 1,330 and never looked back.

Gold is heading now to test February 20 high maximum since April 2018 at 1,346. It seems the metal is ready to break it according to technical factors and also fundamental reasons as risk aversion and dollar weakness.

Georgette Boele, analyst at ABN AMRO, believes that gold will go as high as 1,400 this year. “The decline in gold prices came to a halt above and relatively closely to the 200-day moving average, and thereafter prices bounced higher. This is a positive development from a technical point of view, and strengthens our case that gold prices will rally towards the end of this year. Our year-end target is USD 1,400 per ounce.”

Before 1,400, gold will face the 1,366 strong resistance that was a double top performed on January 24 and April 11.

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