April 29, 2024: Last week's gold trend review and this week's trend analysis

Last week, spot gold closed down 2.3%, the largest decline since December last year. Daocheng Technology financial analyst Eren Sengezer wrote on Friday (April 26) thatGold priceReview the trend of last week and predict and analyze the trend of gold prices in the coming week.

Gold prices fell sharply on Monday but regained some ground in the second half of the week, Sengezer said. Despite last week's decline, gold remains technically bullish and it is too early to say it will peak.The Federal Reserve's monetary policyAnnouncements and the United StatesNon-farm employment dataThis could affect the trend of gold in the coming week.

Spot gold closed last week plunged $54.49, down 2.28%, closing at $2337.64/ounce. It is worth noting that spot gold closed Monday down $64.95, down 2.72%, the largest one-day decline in more than a year.

Gold prices began to face significant bearish pressure last week, posting their biggest one-day drop of the year on Monday, Sengezer wrote. Gold prices managed to rebound in the second half of last week, but still closed lower on a weekly basis. The Federal Reserve's monetary policy announcement and U.S. labor market data for April are likely to drive gold's trend in the coming week.

(Daily chart of spot gold)

The gold market took stock last week

After a relatively quiet weekend with news of the Iran-Israel conflict, geopolitical tensions eased and gold prices took a U-turn early last week, Sengezer said. After benefiting from safe-haven flows and recording impressive gains over the past few weeks, gold prices corrected last Monday, plunging 2.7% in a single day.

Gold prices continued to slide earlier on Tuesday, hitting their lowest level in more than two weeks (close to $2,290 an ounce). However, after disappointing US PMI data, the dollar came under selling pressure, and gold rallied above $2,300 an ounce, ending Tuesday with little change.

The preliminary S & P Global Composite PMI for the United States fell to 50.9 in April from 52.1 in March. The data suggested that private-sector business activity had lost momentum. In addition, the basic details of the report showed weaker input inflation, further weighing on the dollar. In assessing the PMI results, "deteriorating demand and a cooling labor market have reduced price pressures," said Chris Williamson, chief business economist at S & P Global Market Intelligence. "The growth rate of the selling prices of both goods and services slowed welcome in April."
On Wednesday, the dollar held up against its rivals after the US Census Bureau reported a 2.6 per cent rise in durable goods orders to $238.40 billion in March. Gold, in turn, has struggled to gather momentum for recovery.

The U.S. Bureau of Economic Analysis (BEA) reported last Thursday that the U.S. Quarter 1 gross domestic product (GDP) grew at an annualized rate of 1.6% (preliminary estimate), less than the 3.4% growth in the final quarter of 2023 and well below the market forecast of 2.5%. As a result, the dollar continued to weaken, sending gold to close higher last Thursday. However, gold's recovery remains constrained as the GDP report also showed that the GDP price index, also known as the GDP price deflator, climbed from 1.7% to 3.1%, highlighting the greater impact of inflation on GDP growth.

On Friday, the Bureau of Economic Analysis announced that the core personal consumption expenditures (PCE) price index rose 2.8% year-on-year in March. The figure was in line with February's increase and was higher than market expectations of 2.6%. The dollar remained strong, making it difficult for gold to extend its recovery into the weekend.

This week's preview: Focus on Federal Reserve resolutions and non-farm payroll reports

Sengezer pointed out that the Federal Reserve will announce its monetary policy decision on May 1. The market expects the Federal Reserve to leave the policy rate unchanged at 5.25% -5.5%. According to the "Fed Watch" tool of the Chicago Mercantile Exchange (CME), the probability that the Federal Reserve will choose to maintain policy unchanged again in June is about 90%. The Fed is unlikely to provide any new hints on the timing of the policy shift in its statement.
However, at a press conference after the meeting, Federal Reserve Chairperson Jerome Powell is likely to be asked whether there is still a possibility of a rate cut in June. Sengezer said that if Powell does not close the door to a rate cut in June, the initial response could trigger a sharp drop in U.S. Treasury yields and boost gold.

Following the March policy meeting, Mr. Powell noted that the strong inflation figures for January and February were likely due to seasonal factors, and his comments on the inflation outlook will also be closely watched by market participants.

Sengezer said that if Powell adopted a worrisome tone on recent inflation developments, the dollar could remain resilient against its competitors, limiting gold's upside. Finally, if Powell downplayed the disappointing Quarter 1 GDP data, investors could view it as hawkish, making it difficult for gold to gain upward momentum.

On Friday (May 3), the US Bureau of Labor Statistics will release its April employment report. If the growth of non-farm payrolls in the United States falls significantly (for example, the data falls to nearly 150,000), it could trigger a sell-off in the dollar and prompt an immediate reaction in gold prices. Even if the data does not have a significant impact on expectations of a rate cut in June, it could still weigh heavily on the dollar if investors are leaning towards a policy shift in September. According to the Chicago Mercantile Exchange's "Fed Watch Tool", the market expects the probability that the Federal Reserve will leave the policy rate unchanged in September is close to 40%.
Sengezer pointed out that, on the other hand, if the non-farm payrolls growth data is stronger than expected, especially in the context of hot wage inflation data, it could exacerbate expectations of the Federal Reserve's inaction in September and trigger a sharp drop in gold prices by the end of the week.

Technology Prospect Analysis

Sengezer said that from the gold daily chart, the Relative Strength Index (RSI) climbed to 60 after falling to 50 earlier in the week, suggesting that the recent pullback was a correction rather than the start of a trend reversal. In addition, gold prices are still hovering around the 20-day simple moving average (SMA) after closing below it last Wednesday, reflecting sellers' hesitation.

Sengezer said that on the upside, $2,360/oz (static level) is a short-term resistance level for gold prices. If this resistance is overcome, then the next resistance for gold prices is at $2,400/oz (static level, the end of the latest uptrend) and $2,430/oz (all-time high set on April 12).

Sengezer added that on the other hand, $2,300/oz (the 23.6% Fibonacci retracement level of the recent uptrend since mid-February) constitutes strong support. If this support is broken, then the next support is at $2,280/oz (static level) and $2,240/oz (38.2% Fibonacci retracement level).

At 06:25 Beijing time, spot gold was quoted at 2034.48 US dollars per ounce.