Gold ignores solid NFP’s – will Powell’s testimony level the path up to 1,600?

Februar 12, 2020 12:00

Source: Economic Events February 12, 2020 - Admiral Markets' Forex Calendar

The outlook for Gold took a very positive turn in reaction to the solid Non-Farm Payrolls dataset last Friday.

The NFP's increased by 225,000 in January, following an upwardly revised 147,000 rise in the previous month and beating market expectations of 160,000.

Still, expectations of market participants that the Fed will cut rates minimum once by 25 basis points in 2020 are still seen with a likelihood of around 80% (according to the Fed Watch Tool).

In addition to that, the focus in 10-year US Treasury yields is again at a technically important level of 1.50%, as a break lower having serious potential for an acceleration and dynamic move lower in US yields, favouring gains in Gold.

Technically, Gold saw strong demand against the region around 1,555 USD, the region of the 2019 yearly highs, thus helping the yellow metal to substantially trade above the daily trend-support around 1,440/450 USD.

With today's semi-annual testimony before Congress, Fed chairman Powell and his remarks should be closely monitored. While chances seem low that Powell will massively deviate from the Fed statement which was provided two weeks ago, any hints towards an extension of the loose monetary policy and the Fed continuing to deliver massive monetary stimulus in regards to a potential liquidity drain in the Repo market could trigger bullish momentum in Gold again.

And even a drop back below 1,550 USD would only be short-term bearish, activating the region around 1,510/515 USD as potential long-trigger and keeping the potential next target on the upside around 1,650/700 USD active:

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between November 9, 2018, to February 11, 2020). Accessed: February 11, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of Gold fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, in 2019, it increased by 18.9%, meaning that after five years, it was up by 28%.

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