Gold prices continue to shine on the market. Today, we’ve seen new economic data with a spike in U.S. unemployment claims and inflation running at its highest levels. Gold (XAUUSD) is trading around 3630–35, with important support at 3620–25 and 3615. Bulls – as long as traders can hold enough positions above 3625, they should generally agree on a bullish scenario. The dollar index (DXY) has been rejected from key resistance. As a result, the gold market has seen a great deal of volatility following the announcement of both the CPI and unemployment claims.
Just last week, new claims for unemployment jumped to 263,000, well over the expected 235,000. This sharp increase of new claims reflects a still perilous labor market, forcing investors to reconsider the stability of the economy. The U.S. inflation figures released this past August reported a 0.4% monthly increase in the headline Consumer Price Index (CPI). That equals an annualized rate of 2.9%. This unprecedented combination of rising unemployment and inflation has redefined short- and long-term market dynamics, notably the dollar’s stronghold in the marketplace.
Key Support and Resistance Levels for Gold
Gold (XAUUSD) is having a great time, enjoying the most favorable trading conditions in years. Critical support looms large at 3620–25 and then again at 3615, coinciding with the Daily S1 level. These levels are significant to traders as they form the base for any future positive action. According to analysts, as long as Gold stays above 3625, the market is on a bullish sentiment.
Momentum indicators point to Gold likely retesting the upper resistance band of 3645–50. Current trading patterns back this increasing trend. If price can hold above 3625, that should lead to more significant upside potential. A firm high resistance point would be at 3635. There is a more substantial barrier between 3640 and 3642, represented by WR61, likely to stall aggressive bullish traders’ attempts.
The Dollar Index Faces Headwinds
Gold is bullish on the outlook. At the same time, the dollar index (DXY) is met with strong resistance at 98.00 and 98.32 (WR38). These levels have been hard to break through, causing a recent move below its weekly pivot at 97.85. The DXY finds support at 97.56 and 97.38 (WS38) which could provide relief if further pressure persists.
Much of the recent volatility in the DXY can be explained by recent economic data releases. A declining dollar usually supports Gold prices, since it makes the precious metal less expensive for buyers using other currencies. As we move forward, pay very close attention to the relationship between Gold and DXY. That tension becomes all the more important as markets react to fast shifting economic realities.
Economic Indicators Impacting Market Sentiment
The latest increase in unemployment claims, on top of worsening inflation, points toward a challenging economic reality. These indicators can help spur the appropriate response from policymakers, including the Federal Reserve on interest rates and Congress on fiscal measures. Investors will be watching intently to see what effect these changes have on broad market sentiment and asset allocation.
Gold’s bullish lean above key support levels is a sign that traders are still feeling positive about gold’s performance in the face of dollar weakness. Even as consumer spending drives a continued economic expansion, recently surging unemployment claims have sparked fears about economic stability. This transition may further enhance Gold’s appeal as a safe-haven asset.