Gold (XAU/USD) daily chart
The precious metal is keeping a solid bounce off its 100-day moving average (red line) to start the new year, now trading up to $2,680 this week. A test of the $2,700 level beckons, before potentially revisiting the end-November and December highs around $2,725-26 next.
A major positive for gold to start the year is that the gains we’re seeing is coming despite rising yields and a stronger dollar. That really points to the strength in the animal spirits surrounding gold at the moment. That being said, one can argue that gold is also benefiting from its typical January seasonal tailwind. So, there’s that.
It is still early days and there will be a big test for gold coming up as soon as later today. The upcoming US jobs report could possibly be key in dictating trading sentiment for the month, so keep a watchful eye on that.
But considering the optimism as seen above, I reckon the risks for the next reaction in gold might be fairly asymmetric. If the US jobs report turns out to be softer and that weakens the dollar and Treasury yields, I reckon that will send gold soaring going into the week ahead.
As for the opposite outcome on the data, it might not necessarily put too much of a dent in gold. That considering the stronger resolve of dip buyers to start the year. But it will certainly be interesting to see how such a test of that will play out this early on.
For now, the backdrop is set as such. Gold is eyeing a fourth straight day of gains and things could get even hotter if US labour market conditions underwhelm expectations later today.