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In Thursday’s early trading hours, gold experienced a notable climb, successfully surpassing the 50-day EMA, suggesting the potential for continued consolidation.
Although I am not exhibiting a strong bullish bias towards gold, it is significant that yields declined during Thursday’s session.
This provided XAU/USD with a slight respite, as U.S. yields had been acting as a major constraint on its price.
Despite recent movement, the chart still indicates that gold remains firmly within a consolidation phase; indeed, it appears we are currently at its midpoint. Therefore, if I were to take a position on XAU/USD, it would lean towards the long side, as I would be hesitant to short what has demonstrated a significant uptrend.
Sizing: A Critical Factor
Simultaneously, I am hesitant to commit substantial capital to the gold market, particularly given the likelihood of somewhat reduced liquidity. It’s important to note that many traders will likely remain on the sidelines until the first full week of the month. Moreover, even then, a cautious approach is advisable considering the upcoming non-farm payroll data release on Friday, which will significantly influence the Federal Reserve’s policy decisions.
In theory, gold may rally for a couple of sessions, but a subsequent unexpectedly strong jobs report could have implications for Federal Reserve interest rate policy, and potentially reverse any upward momentum. Therefore, despite the recent upward bias over the last couple of days, gold remains firmly within its consolidation phase. However, whether this will lead to a breakout remains highly uncertain. Indeed, I would need to see XAU/USD decisively surpass the $2,715 level in the spot market before becoming more bullish. As such, it appears that buying dips will likely remain a viable approach for short-term gains.
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