30 Oct 2024

current;-2785

target;-2774

sl;-2794

entry point;-2790

Gold has declined from its recent peaks following the release of a robust ADP Employment Report.

The United States economy expanded at a rate of 2.8% in the third quarter, supported by strong personal consumption figures.

The rally in XAU/USD appears to be excessive, as indicated by the bearish divergence observed in the RSI.

Gold prices (XAU/USD) are experiencing a pullback following the achievement of new record highs on Wednesday. The US ADP Employment report exceeded expectations, alleviating investor concerns that arose from Tuesday's JOLTS Job Openings report and providing renewed support for the US Dollar.

Subsequently, the US Gross Domestic Product (GDP) reported an annual growth rate of 2.8%, which, while below the anticipated 3%, still reflects a robust growth trajectory. Additionally, Personal Consumption continues to exhibit a strong upward trend, reinforcing the notion of a resilient economy.

The favorable economic data from the US has led to an increase in US Treasury yields; however, the outlook regarding the Federal Reserve's (Fed) monetary policy remains unchanged. The market is almost fully anticipating a 25 basis points rate cut in the upcoming week, with a high likelihood of another cut in December.

Daily digest market movers: Gold consolidates gains with investors pricing two more Fed rate cuts in 2024 

The US economy added 233,000 new private payrolls in October, as reported by the ADP employment report. This figure surpassed market expectations of 115,000, while the September data has been revised upward to reflect an increase of 159,000, up from the previously estimated 143,000. 

These results have alleviated concerns stemming from the US JOLTS Job Openings report, which indicated a reading of 7.44 million in September, marking the lowest level in over three years. 

In the third quarter, the US GDP expanded at a rate of 2.8%, falling short of the 3% anticipated by analysts, yet still demonstrating stronger performance compared to other major economies. 

Core Personal Consumption Expenditures rose at a rate of 2.2%, lower than the previous quarter's 2.8% but exceeding the expected 2.1%. These statistics indicate that consumer spending remains robust, contributing to economic growth and exerting upward pressure on inflation. 

According to the CME Group’s Fed Watch tool, there is a 96.3% probability of a quarter-point rate cut by the Federal Reserve next week, an increase from 92% on Tuesday. Meanwhile, the likelihood of an additional 25 basis points cut in December has decreased to below 70%, down from 76.6% prior to the data releases.

Technical analysis: XAU/USD’s rally looks overstretched near $2,800

Gold is on a bullish trend amid a supportive fundamental backdrop, but the technical picture is showing signs of a potential correction. The RSI is at overbought levels in most time frames, with the 4-hour chart showing a bearish divergence, which often anticipates a corrective reaction.

Immediate resistance is the intra-day high at $2,780, ahead of the $2,800 level. Support levels are the previous top at $2,760 and $2,730.

The daily chart shows the pair likely to be at the end of a 5-wave (Elliot Wave) impulse, with the 261.8% retracement of the 4th wave, in the $2,800 area, as a potential pivot point.