Gold Completes 38.2% Fib Retracement: What’s Next?

The price of gold closed at $1,809.75 after hitting a high of $1,811.65 and a low of $1,794.85. GOLD continued its upward trend for the third consecutive session on Wednesday amid continued weakness in the US dollar and overall demand for safe-haven precious metals. The US dollar index, which measures the value of the greenback against the basket of six major currencies, fell for the third consecutive session and reached the level of 95.81. The dollar was weak due to the unexpected drop in the number of job creations in January. US job growth was unsatisfactory in the first month of 2022 and kept the US dollar under pressure on Wednesday.

On the data front, at 18:15 GMT, the ADP Non-Farm Payrolls change fell to -301K from 185K and weighed on the US Dollar, pushing gold prices higher. Wednesday’s dismal jobs data gave a negative impression on job growth, which ultimately weighed on the Fed’s plans to raise interest rates in the near future. The Fed said macroeconomic data and the evolution of COVID-19 will serve as a gauge for the next rate hike after March.

On the other hand, demand for safe-haven gold also kept the precious metal higher on Wednesday after US President Joe Biden ordered the Pentagon to deploy more than 3,000 US troops to bolster the defense of European allies in the first great movement of American forces. in Russia’s military standoff with Ukraine. The move came after fears of a Russian invasion of Ukraine intensified in the market. It should be noted that the American troops deployed will not fight in Ukraine but will ensure the defense of American allies. However, growing tensions on the Ukrainian border were enough to increase demand for safe haven gold and push its market price up.


Meanwhile, on Tuesday, the World Health Organization (WHO) said the newly discovered sub-variant of the highly contagious variant of Omicron had been detected in around 57 countries. Reports suggested a small difference between the BA.2 sub-variant (stealth variant) and the original Omicron variant; however, the stealth variant was still considered more contagious than the original. The United Nations health agency said some countries were showing signs where the Stealth variant accounted for more than half of all Omicron cases. This WHO report could also have supported higher gold prices on Wednesday.

On Thursday, the US Economic Record will release the ISM Services PMI report, which will have an impact on the US Dollar. Other less impacted reports to be released are last week’s unemployment claims, end services PMI, factory orders and preliminary non-farm productivity for the quarter. Market participants will be watching the ISM Services PMI closely to guess the future momentum for gold prices.

Gold Technical Outlook (XAU/USD)

Gold completes a 38.2% Fibonacci retracement at $1,808 before reversing lower. Gold is currently trading at $1,805 and heading south towards an immediate support level of $1,799. In this scenario, the next support level for gold is at 1,791, which is extended by a double bottom level.

On the upside, XAU/USD might encounter resistance at the 1809 level. The uptrend may be extended 50% or 61.8% from the Fib levels to the 1818 or 1826 level. Because the RSI is above 50, the chances of a buying trend remain high. So, consider staying bullish if the price breaks above 1,809, and vice versa. Best wishes!

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