Gold Reverses from 1960 following strong US NFP data

Gold had been on a steady rally to the upside with the price climbing along the bullish trendline from the 1620 price level in November 2022 to reach a high of 1960 in February 2023. This move higher was driven by general market anticipation that the US Federal Reserve would pivot on its current monetary policy, slowing down or pausing future interest rate hikes sooner than expected.

Fundamental Overview
Last week, the US Federal Reserve, European Central Bank, and Bank of England increased their respective interest rates by 50bps. With the central banks continuing to hike rates, and real yields rising again, gold could be viewed as a less attractive investment option.

On Friday, the US non-farm employment change data was released stronger than expected at 517k (Forecast: 193k) and the US unemployment rate fell to 3.4%. This led to a significant recovery in strength for the DXY, with the price climbing to the 103 price area.

Technical Overview
As the DXY strengthened, the negatively correlated Gold saw a sharp pullback, with the price trading down to the 1864.61 price level. The retracement in Gold saw it break through several key technical bullish elements, in particular, the bullish trendline from November, the 1900 round number support level, and the first Fibonacci retracement level of 23.6%, leading to the near-term technical outlook for Gold to shift from bullish to be short-term bearish.

A deeper correction to the downside can be expected, as the Relative Strength Index (RSI) reversed strongly from the overbought region and through the 50.0 level. However, the downside momentum could find support between the price range of 1800 and 1740 price range, formed by the 50% and 61.80% Fibonacci retracement levels respectively.

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