- Gold remains on the back foot at the start of the week.
- Profit-taking seems to have paved the way for a rebound.
- A daily close below $1,730 could trigger another leg lower.
Update: Gold is having a difficult time staging a convincing rebound following the steep drop witnessed in the early Asian session. With the latest data from the US confirming the improving labour market conditions, the XAU/USD pair started to edge lower and was last seen losing 1.5% on a daily basis at $1,736. The US Bureau of Labor Statistics reported on Monday that the number of job openings on the last business day of June reached a new series-high of 10.1 million, surpassing the market expectation of 9.28 million. In the meantime, the US Dollar Index turned positive on the day and is currently posting small daily gains at 92.90.
After suffering heavy losses on Friday, gold closed the week in the negative territory and extended its slide during the Asian trading hours on Monday. Following a sharp drop to its lowest level since March at $1,677, the XAU/USD pair staged a rebound and was last seen trading at $1,744, still down more than 1% on a daily basis.
The lack of fundamental drivers behind golds recovery suggests that it was likely fueled by profit-taking. Furthermore, the pair lost its momentum near $1,750, reaffirming the view that the technical correction could have ended.
On Friday, the impressive July labour market report from the US triggered a USD rally and caused XAU/USD to turn south. With the US Bureau of Labor Statistics reporting that Nonfarm Payrolls increased by 943,000 in July, investors started to readjust their positions with anticipation of the US Federal Reserve starting to reduce asset purchases before the end of the year. Reflecting the broad-based greenback strength, the US Dollar Index climbed to its strongest level in two weeks at 92.92.
Later in the session, JOLTS Job Openings for June will be the only data featured in the US economic docket. Additionally, market participants will look for fresh clues regarding asset tapering when Atlanta Federal Reserve President Raphael Bostic and Richmond Federal Reserve President Thomas Barkin speak during the American session.
Gold technical outlook
On the daily chart, the Relative Strength Index (RSI) indicator stays near 30, suggesting that sellers could remain on the sidelines in the near term and wait for gold to correct its oversoldness. Nevertheless, the technical outlook remains bearish with gold staying below static resistance levels.
The initial hurdle is located at $1,750 (former support) ahead of $1,760 (static level). In case gold manages to close the day above the latter, it could go into a consolidation phase and wait for the next fundamental catalyst.
On the other hand, $1,730 (static level) aligns as the first support and additional losses toward $1,700 (psychological level) could be seen if this level fails to hold.
Additional levels to watch for