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Gold Prices Heads Up, But Gains Constrained By US Fundamentals

Gold prices are marginally down on Monday after Friday’s massive gains. The commodity traded at $2,091 at the futures market, having lost $4.2 as of 11.40 am UTC. Similarly, spot gold was flat at $2,082. The commodity currently faces rejection at the $2,100 and $2,090 at the futures and the spot markets, respectively. Nonetheless, the commodity is at 3-month high prices, but the market will likely go slow on buying it, ahead of key macroeconomic fundamentals.

The US dollar currently faces headwinds caused by weak fundamentals in the last week of February. The current weak momentum around the US dollar builds from a lower-than-expected ISM Manufacturing PMI reading in February. The figure came in at 47.8 from January’s 49.1, far-below the 49.5 consensus forecast.

Many traders are holding off aggressive moves on gold, in anticipation of high-impact macroeconomic data from the US. One of the highlights of the week, however, will be the Semiannual Monetary Policy Report delivery by Fed Chairman, Jerome Powell. His presentation, scheduled for Wednesday, is expected to have a far-reaching impact on markets beyond this week.  Also, the February Non-Farm Payrolls data will be out on Friday, and will likely inject new impetus into the market.

In the meantime, gold is likely to continue gaining as US Treasury yields fall. The gold and Treasury bonds have an inverse relationship, and the latter is currently struggling to stay above the 4.200% level.

Technical analysis

Gold price pivots at $2073, and the RSI indicator favours upside advance. The upside momentum will target going past the $2100 psychological resistance. A successful breach will set the commodity on course to target $2110. However, the buyers could lose the momentum if they give in to pressure under $2073. That could lead to breach of the $2064 support, which would invalidate the upside narrative. Further control by the sellers at that point could see the support move to $2056.