Gold steady with rising yields ahead of Powell's ECB speech

Gold has traded within a defined range over the past three months with neither buyers nor sellers able to gain the upper hand. Volatility has dropped to a multi-week low, while one technical indicator, consumer confidence index (CCI), shows the precious metal neither overbought nor oversold.

Impact of US dollar strength

The recent bout of US dollar strength, underpinned by a move higher in longer-dated US Treasury yields, may soon weigh on the precious metal and test range support. Since gold is typically priced in US dollars, a stronger greenback makes gold more expensive for investors using other currencies, potentially reducing demand. The US dollar index (DXY) is now probing levels last seen at the start of May.

DXY daily chart

Overview of ECB forum

This year’s European Central Bank (ECB) forum on central banking starts in Sintra, Portugal, bringing together various global central bank governors, academics, and financial market representatives. On the policy panel today, beginning at 2.30pm UK, is Fed chair Jerome Powell. Markets will be listening to see if he gives any clues about the health of the US economy and monetary policy moving forward.

Key upcoming US jobs data

This week also sees the release of a raft of US jobs reports and data, starting with the latest Jobs Openings and Labor Turnover Survey (JOLTs) at 3.00pm UK today. Job openings fell to 8.059 million in April, the lowest level since February 2021. Job openings are expected to fall further in today’s report to 7.90 million.

Tomorrow sees the release of the latest Automatic Data Processing Inc. (ADP) employment numbers and the weekly initial jobless claims. This release will take place before the main event of this week, the Non-farm payrolls release on Friday at 1.30pm UK.

Gold price action drivers

The US jobs data and chair Powell’s appearance at Sintra will be the main drivers of any price action in gold this week. The precious metal is testing both the 20- and 50-day simple moving averages and a break below would bring range support into focus.

Gold technical analysis

IG retail trader data show 58.77% of traders are net-long, with the ratio of traders long to short at 1.43 to 1. The number of traders net-long is 0.41% lower than yesterday and 4.86% lower than last week, while the number of traders net-short is 4.48% higher than yesterday and 5.72% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current gold price trend may soon reverse higher despite the fact traders remain net-long.

Gold daily price chart

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