Gold Price Analysis: XAU/USD underpinned and trading near 200DMA at $1806 as ADP data eyed By Frank_Macro XAUUSD Gold
6.00 level, spot gold prices are trading in the green. Note that a cheaper US dollar makes USD-denominated gold cheaper for purchase by holders of international currencies, thus boosting its demand. Market commentators are citing a combination of 1) a paring back of long positions and 2) a paring back on hawkishbets following recent policymaker communications as the major driver of recent US dollar weakness.
Regarding positioning; MUFG noted on Wednesday that their 2yr z-score measure of Leveraged Funds’ long USD positioning is “at an extreme”, with USD longs at a level not seen since 2011. However, ING says that “if position-squaring is indeed behind this week’s dollar weakness… we expect the dollar’s positioning now to have reached a somewhat more balanced level which can allow for some stabilisation,” the bank says.
Regarding recent Fed speak, policymakers played down the prospect of a 50bps rate hike in March. Meanwhile, though policymakers speaking this week have unanimously expressed support for the start of a rate hiking cycle next month, most emphasised a data-dependent approach when it comes to determining its timing, pace and extent. Not only has such rhetoric helped take the wind out of the US dollar, but it has also helped keep a lid on US bond yields, another positive for spot gold.
Ahead of the release of payroll company ADP’s estimate of US employment change in January at 1315GMT, spot gold prices have nudged back above the $1800 level. Analysts have said that due to the data’s poor predictive power of the official
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