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Gold (XAU/USD) Looking Technically Oversold, US Data, NFPs Key for Next Move

2024-12-30DailyFXDailyFX
Gold is looking oversold according to one technical indicator, and any weak US data may see the precious metal turn higher in the short-term
  • CCI indicator is at its lowest level since early May.
  • Weaker US Treasury yields should underpin the precious metal.
  • US ISM and the latest US Jobs Report will drive the next move.

Gold is slightly better bid in mid-morning trade, aiming to establish a near-term base just below the $2,320 per ounce level. This resilience is partially attributed to the recent decline in US Treasury yields. After peaking at 5% by the end of May, the yield on the rate-sensitive 2-year Treasury note has retreated to 4.80%. A break below the supportive 200-day simple moving average at 4.75% could leave the multi-week low of 4.70%, made on May 16, vulnerable.

The recent series of higher highs in Treasury yields have been disrupted, signaling a potential end to this year's yield rally. The Commodity Channel Index (CCI) indicator suggests that the market is currently oversold, indicating a likely short-term period of consolidation before the highly anticipated US Jobs Report (Non-Farm Payrolls) scheduled for this Friday (13:30 UK).

UST 2-Year Yield Chart

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Surprisingly, gold has exhibited resilience in recent days, failing to benefit from the weak US economic data and growing expectations of Federal Reserve rate cuts. In this context, market participants eagerly await the release of the latest ISM services data later today, which will be closely scrutinized. Forecasts suggest the May services figure will come in at 50.5, compared to 49.4 in April. Any downside miss in this crucial economic indicator could provide the catalyst for gold to push higher. However, the highly anticipated Non-Farm Payrolls (NFP) report, scheduled for Friday, will ultimately decide the precious metal's short-term trajectory heading into the weekend.