During the mid-European session, the XAU/USD gold currency pair retreated. This drop came on the heels of a major European Central Bank monetary policy maneuver. Though it has lost more than $50 from its recent peaks, optimism is still the general feeling among traders and investors. Despite geopolitical tensions, the biggest influence on the dynamics of the gold market can be found with central bank actions. On top of that, investors highly monitor the expected US Nonfarm Payrolls data for more clues.
During the last trading session, XAU/USD was volatile, as it tended to mirror the moves of sentiment in the markets. Following an all-time high, the duo fell sharply. As a result, this recent decline has brought it down to the low end of its recent trading range. Despite this, bulls still clearly outnumber bears, with XAU/USD still growing above key moving averages.
According to the 4-hour chart, XAU/USD is now trading beneath the flat 20 Simple Moving Average (SMA). This SMA is providing assistance at approximately $3,295.40. Even with this recent pullback, the pair remains far above its longer-term 100 and 200 SMAs. All three of these averages are moving higher, indicative of a bullish long-term trend for the gold market.
According to market analysts, XAU/USD have returned to recognised levels on the daily chart. From a technical standpoint, the pair is currently testing key resistance levels at $3,367.10, $3,382.60, and $3,394.05. On the bearish side, significant support lies at $3,339.50, followed by $3,325.60 and $3,316.90. While it is true that there are short term swings, this technical positioning paints a picture of bullish continuation in the medium to long term time frame.
Against this backdrop, market participants seem to be outright hopeful about the next US Nonfarm Payrolls report. Expectations are for the US economy to have added around 130,000 net new jobs in May. Of these, an increase would considerably shape the long-term trajectory of XAU/USD. The unemployment rate is projected to stay flat at 4.2%. This stability can only help boost investor sentiment towards gold.
Additionally, geopolitical factors are widely believed to have shaped market dynamics as well. Recently announced trade talks between former President Trump and China may improve overall market sentiment and potentially buoy gold prices. As investors digest these developments, they remain focused on how all these factors will come together to affect XAU/USD going forward.