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Gold: Uptrend May Resume as Bulls Take Control

Share Written By
Rahul Gupta

Head of Currency Research

11 May 2021

The MCX gold price continued to exhibit a strong solid show after a big blowout of the US Nonfarm payrolls data. The market participants were expecting a better read of the NFP data with one step closer to full US economic recovery. Also an upbeat jobs data would have stoked inflation worries and somewhere would have given the lead to expectations that the Fed will reduce monetary stimulus, boosting US yields and the dollar. However, US NFP hit a record on weak jobs data and added to the case for ongoing Federal Reserve monetary stimulus. And now there are speculations that the Fed will continue to keep interest rates low for an extended period due to the receding risk of a rapid acceleration in inflation. The US nonfarm payrolls showed jobs growth unexpectedly slowed in April, jobs rose by 266,000 in April, trailing the projected 1 million jump. A softer payroll is good for the reflation trade; weakening the dollar across the FX spectrum with a solid bid in gold prices.However, now the focus shifts to US consumer price data due on Wednesday, which will help investors determine whether they need to scale back their inflation expectations even further or not. Reuters expect inflation to increase by 3.6% on year in April, which may boost US yields and weigh on gold. Also, this week a range of Fed speakers are due, including Chicago Fed President Charles Evans on the economic outlook later today and US Fed Governor Lael Brainard tomorrow. And any reiteration over a dovish stance may keep the gold rally intact despite upbeat US inflation data.As seen in the daily chart, after hitting a more than two weeks low of 46462 MCX Gold made a reversal thereafter to currently trading at 47900. Immediate Bollinger band's upper-level resistance is at 48200 and strong top-to-top trend line resistance lies at 48360. So consistent trading above 48400 will open doors for 49000-49700. However, support is located at 47330-47000-46500.