Gold Price Outlook As the US Dollar Holds Steady

Summary:
• The US dollar is stable, but gold's weak fundamentals could change as China releases another weak economic data and US readies unemployment data.

Gold price continues to shed weightas the market continues to favour a strong US dollar. Spot gold traded at a 24-hour low of $2,029 per ounce, having shed 0.27% at 11:43 GMT. The commodity has spent the better part of the morning below yesterday’s closing price and looks to be on course to close in the red if the market momentum continues to weaken.

The US dollar index (DXY) has established a somewhat stable foundation around the 104.00 pivot level, cushioned by last week’s favourable fundamentals.  Similarly, the 10-year US Treasury yields remain strong after yesterday’s fluctuations. The yields have inched up +9 basis points over the past month, and stood at 4.12% at the time of writing.

Furthermore, the 10-year Treasurys attracted strong demand at Wednesday’s auction, shaving some of the day’s gains. The latest speeches by FOMC members,  have however solidified views that the Fed will likely prioritise bringing inflation down even in the face of back-to-back positive US economic data.

Gold prices will also be impacted later on Thursday whan the US Department of Labour releases the latest data on continuing jobless claims. The figure is projected to print at 221,000, and a substantial swing on either side could affect the US dollar.

On the positive side for gold prices, China economy continues to churn out weak figures. The latest development is a -0.8% decline in the consumer price index, the biggest contraction in 15 years.  Furthermore, the figures released on Thursday exceeded consensus projections which had estimated a -0.5% decline. Elsewhere, the country’s stock market has been on a downtrend that have seen it flirting with five-year lows. In addition, the benchmark CSI 300 index has declined by nearly 20% in the last year.

The dim economic outlook could favour safe haven gold as investors look for alternative investments outside the US stock market.

Technical Analysis

Gold’s RSI signals a consolidation, with a likelihood of a bearish-leaning choppy price action. The pivot point will likely be at $2,068, with the bears likely to target $2,028. A breach below the first support, could see the support move further down to $2022.  Upside action is likely to be minimal and will be signaled by a move to $2,042. Further gains will likely be marginal, with minor rise to the second resistance at $2,046.