The $1,800 figure now acts as support, suggesting bearish risks surrounding gold prices are limited
Gold prices failed to capitalize on dollar weakness on Wednesday, extending consolidation in a tight trading range. The metal has been lacking directional impetus these days, oscillating around the 100- and 200-DMAs while holding above the $1,800 figure.
Yesterday, the survey by ADP showed companies added jobs at a slower pace than expected, with private sector employment increasing by 374,000 jobs from July to August versus +600,000 expected. Weak results disappointed dollar bulls to send the US currency to fresh lows. On Thursday, the greenback remains on the defensive as traders wait for U.S. jobs data due on Friday. The report would give a hint at the potential action by the Federal Reserve later this year and thus could affect gold prices through dollar dynamics ahead of the weekend.
On the upside, the immediate resistance arrives in the $1,820-$1,825 area for the time being. The precious metal struggles to challenge this region despite the persisting dollar weakness this week. On the positive side, the $1,800 figure now acts as support, suggesting bearish risks surrounding gold prices are limited.
If the greenback faces a more intense selling pressure following the upcoming employment report, the bullion will likely regain the $1,820 level by the end of the trading week. In the immediate term, the yellow metal would remain in consolidative mode around the mentioned moving averages.
In the longer term, the outlook for gold would depend on the Federal Reserve policy. Further rise in inflation and a more robust recovery in the US economy could prompt the central bank to raise interest rates, which would be dollar-positive. If so, the yellow metal will have to suffer solid losses.