NON-FARM Payrolls Day: SPOT GOLD Price projection & analysis: XAUUSD: $1900/1888 or $2030/2048?

Key Fundamentals & EVENTS IMPACTING SPOT GOLD in AUGUST 2023:

1. FED: In a much-anticipated move, the Federal Reserve raised interest rates to their highest level in last 22 years by 25 basis points / or a quarter percent, to 5.25% to 5.50%. Also, Fed will continue to reduce its balance sheet (quantitative tightening) by allowing up to $95 billion per month in bonds to mature without reinvestment. The Fed also retained its commitment to reversing a previous policy of quantitative easing (QE) that involved purchases of Treasury and mortgage-backed securities. QE was aimed at providing more liquidity to capital markets.
   The Federal Open Market Committee (FOMC) made few modifications to its statement, except to upgrade its description of growth to “moderate” from “modest.”  However, it did retain the language that indicated job gains remain “robust” and inflation “elevated,” even though inflation has fallen substantially over the past few months. More importantly, it dropped any allusion to pausing rate hikes in the near term, noting only that the committee will consider the cumulative tightening and the lag time between a change in policy and its effect on the economy and any new financial developments in setting policy.
2. BOJ: The Bank of Japan (BOJ) left rates unchanged again, BOJ Policy Rate remained at -0.10%. The Policy Board decided to conduct yield curve control with greater flexibility, surprising the market with a yield curve control tweak. While the BOJ kept interest rates at ultra-low levels, it said the tweak to its bond yield curve control scheme (YCC) would allow it to respond “nimbly” to risks including rising price pressures.
   BoJ Announced Unscheduled Bond Buying, Second Time This Week: BOJ maintained guidance allowing the 10-year yield to move 0.5% around the 0% target, but said those would now be “references” rather than “rigid limits”. The BOJ said it would offer to buy 10-year Japanese government bond at 1.0% in fixed-rate operations, instead of the previous rate of 0.5%, signalling that it would now tolerate a rise in the 10-year yield to as much as 1.0%.
3. Job Data: According to ADP’s National Employment report, private hiring increased by 324K in July, exceeding estimates of 189K, ahead of Friday’s US Nonfarm Payrolls, which should add circa 200K workers. For the ninth consecutive month, the ISM Manufacturing PMI came in below 50, though it continued to improve; compared to June’s 46, it reached 46.4. Although it was an improvement, the trend appears to be sluggish.
4. US Dollar Index: the US Dollar Index (DXY), which measures the dollar’s value against a basket of six currencies, advanced 0.54% to 102.514 on 03 August 2023, extending its six-day winning streak. U.S. dollar strengthened despite Fitch’s downgrade of the U.S. credit rating to AA+ from AAA. Investors seemed unfazed and focused on positive data from the ADP National Employment report.
   Fitch’s decision to downgrade the U.S. credit rating was attributed to concerns about potential fiscal deterioration over the next three years and the debt ceiling crisis that was averted at the last minute a couple months ago. The US credit rating downgrade should not have been a surprise for investors that have been following Fitch’s comments, but the timing surely caught everyone off guard.  The Japanese yen initially benefited the most, but eventually the dollar steadied as safe-haven flows broadened. US 10 Year Yields is above 4%.
5. WGC: Central bank buying slowed in Q2 but remained resolutely positive. This, combined with healthy investment and resilient jewellery demand, created a supportive environment for gold prices. Q2 gold demand (excluding OTC) dropped slightly by 2% y/y to 921t, driven by a marked deceleration in net central bank buying compared to above average purchases in Q2’22. Inclusive of OTC and stock flows, total demand strengthened 7% y/y to 1,255t. Despite sales from Turkey in response to specific local market conditions, the 103t of net official sector purchasing in Q2 is in line with the underlying positive trend towards gold among central banks.
6. China: Chinese authorities released additional policy guidelines on Monday but no concrete measures to boost the sputtering economy and domestic consumption, leaving investors wanting as dull activity data heightened pressure for officials to act. it appears that there have been additional policy guidelines released by Chinese authorities to address the sputtering economy and domestic consumption. However, concrete measures to boost the economy and consumption have not been implemented. China is unlikely to unleash a massive economic stimulus package, but investors remain hopeful for such measures. The State Council of China had previously outlined a 1 trillion-yuan stimulus package, which included 19 measures to support the economy.
7. ECB: The ECB raise interest rates by 25 basis points. The Governing Council decided to raise the three key ECB interest rates by 25 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 4.25%, 4.50% and 3.75% respectively, with effect from 2 August 2023. Asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) The APP portfolio is declining at a measured and predictable pace, as the Euro system no longer reinvests the principal payments from maturing securities. As concerns the PEPP, the Governing Council intends to reinvest the principal payments from maturing securities purchased under the programme until at least the end of 2024. In any case, the future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance. The Governing Council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic.
8. BOE: The Bank of England raised its key interest rate by 25 bps to a 15-year peak of 5.25% on Thursday, giving a new warning that rates were likely to stay high for some time as the knock-on effects from strong inflation may last longer than previously thought. British inflation hit a 41-year high of 11.1% last year and has fallen more slowly than elsewhere, leaving it above other major economies. But in June it dropped more than expected to 7.9%, allowing the BoE room for Thursday’s smaller hike.

How to trade Spot Gold: XAUUSD on NFP data today?

XAUUSD Bearish Scenario: $1907/1888/1866/1836/1818?

If the bearish momentum extends, gold price may fall further towards $1907/1888/1866/1836 price trap zone with 1818/1777 as next stops, if Gold crash halts at 1866 or 1836/1818 zones a reversal can be expected with a RT V 23.6 M15 M30 RT before/in next 15 trading days.

XAUUSD Bullish Scenario: 1966/1985/2020/2048?

If the Bullish momentum pushes Gold price across $1987 barrier, $2007 – $2020 followed by $2048 & $2069 zone can be the next target for Gold, opening way to $2096/2121 zone as an ideal sell entry.

Heading into the NFP show today, Spot Gold price is under a price trap of $1938 – 1930 zone, as investors/traders are reluctant to place bets before NFP data is released. In current scenario, and as per past data fundamentals-based co-relations have guided us in a more accurate manner than technical co-relations, however I prefer to compare and match both for a better accuracy. The US NFP will emerge as one of the main market driver for Gold price. Point to be noted: let us not forget ongoing geo-political tensions between China – Taiwan-US and Upcoming Jackson Hole Economic Symposium on 24-26 August which might trigger a price rally of more than $100/150 in Spot Gold price.

BUY/SELL STOPS |MONTHLY B/S LIMITS: TARGET RT 23.6 TF M15/30/H1 | NAP $5/set:   

S2 ZONE 1888 | DOWN TREND (Below $1907)  : 1888/1866/1836/1818 | BUY LIMITS
R1 ZONE 1981| UP TREND (Above $1970)        :  1985/2009/2036/2048 | SELL LIMITS

Technical Analysis | XAUUSD CMP $1935 | Gold Price – SR (D1) (MN) Levels to watch:

04.08.2023 | XAUUSD: Monthly Price Projection and Trading Scenario by Piyush Ratnu

PROJECTED TRADING SCENARIO:

• Observe price at US OPENING D1 SS1 and then US SS2
• Observe SR: S3($1920)-3/6/9/12 & D1.SR R3 ($1947)+3/6/9/12 for M5/15.236RT
• Do not enter between the pivot zone D1: S/R zones
• ObserveD1SR: FIB 23.6% on M5 and M5/M15 TF for NAP target price based exit in buy or sell entry after 20/40/60/90 minutes of NFP and $25/40 price movement sets
• Movement of $30/45 dollars on Gold price is not something unexpected nowadays, and a surprise on Monday during early trading hours cannot be ruled out too, so closing all positions today in net average profit is always the best trading strategy for every trader who wants to safeguard his principal.

I expect V pattern on M15, M30, H1 and H4 TF chart in sequence in next 9 days (short term target) and 21 trading days (long term target). XAUUSD CMP $1935. I will prefer to BUY lows near SR zone mentioned in the above analysis.

Point to be noted: let us not forget ongoing geo-political tensions which can trigger an upward price rally of more than $150/200 in Spot Gold price. Another catalyst of low volumes might step in too during Monday early morning opening.

Terms: TF: Time Frame | RT: Retracement | SR: Support Resistance | NAP: Net Average Profit

It is always wise to first PLAN THE TRADE, and then TRADE THE PLAN!

Hence, it is suggested to first observe the crash or rise with specific zones and levels in mind on the basis of various fundamental and technical parameters mentioned above, before entering a trade in a specific direction with a target of net average profit in a specific set of trades.

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