As the market opens on Friday, the precious metal gold, tracked via the XAU/USD pair, shows tentative signs of buyer interest for the second consecutive day. However, the incremental gains made do not clearly indicate a strong bullish conviction. This hesitation in the market is partially due to the broader positivity in global equity markets, which typically reduces the allure of traditional safe-haven assets like gold, keeping it shy of the coveted $2,000 ( ZAR 36,800) mark during the early European trading hours.
South African investors, alongside their global counterparts, are currently taking a measured approach, opting to remain on the sidelines as they anticipate the release of the US monthly jobs report. This highly-anticipated data is expected to influence the Federal Reserve’s (Fed) monetary policy decisions, potentially affecting the path of interest rates and consequently providing a fresh directional impetus for gold prices.
The current market sentiment is buoyed by the expectation that the Fed is approaching the peak of its interest rate hikes, with speculations of rate cuts beginning as soon as June 2024. This outlook has led to a decline in US Treasury bond yields, further softened the US Dollar, and, by extension, propped up the appeal of non-yielding gold to some extent. This dynamic is particularly relevant for the South African Rand, which is often impacted by shifts in USD strength.
Contributing to gold’s support are geopolitical uncertainties, such as the persistent unrest in the Middle East and the looming worries over an economic slowdown in China. These factors have traditionally stoked demand for gold as a safe haven, though the current market’s lack of follow-through purchasing power suggests that investors may still be exercising caution.
From a technical standpoint, the gold price appears confined within a well-established range, having oscillated within this boundary over the past several days. Traders are now awaiting a fresh catalyst, potentially from the impending US Non-Farm Payrolls (NFP) report, which could dictate the next significant move in the market. The report’s outcomes, if they deviate from the expected addition of 180,000 jobs and an unemployment rate steady at 3.8%, could inject notable volatility into the markets, swinging the pendulum for gold demand.
Gold’s technical analysis reveals that while the metal may face resistance near the psychological $2,000 threshold, a breakthrough and sustained performance above this level could pave the way for further gains, targeting the next resistance near the $2,022 (ZAR 37,204) area.
Conversely, the downside appears to be buffered at around the $1,980 (ZAR 36,432) mark, with potential selling pressure exposing intermediate supports at $1,964 (ZAR 36,118) and subsequently the $1,954-$1,953 (ZAR 35,914 – ZAR 35,895) regions.
As the South African market tunes in, the US Dollar’s performance this week, especially against major currencies like the New Zealand Dollar, will also be a key factor to watch, given its implications for gold prices and the broader commodity space.
In summary, as South Africa’s investors join the global community in tracking these developments, the near-term outlook for gold hinges on the convergence of technical patterns, geopolitical concerns, the US monetary policy trajectory, and the upcoming jobs data from the United States. These will be critical in shaping the investment strategies in the commodities market for the region.