Weekly Market Analysis / 29 November - 3 December 2021

Gold struggles to capitalize on weak NFP data, holds near $1,770

Gold started the week under modest bearish pressure and closed in negative territory on Monday and Tuesday. Following an uninspiring recovery attempt toward $1,800 on Wednesday, gold struggled to hold its ground and touched its lowest level in a month @1,761. Although the disappointing November jobs report from the US triggered a rebound initially on Friday, gold failed to attract buyers and finished the third straight week deep in the red. 

  • Gold registered heavy losses for the third straight week.

  • Fed looks to accelerate taper despite dismal NFP data, Omicron worries.

  • Next target on the downside for gold aligns at $1,750.

What Happened Last Week

  1. Safe-haven flows dominated the financial markets ahead of the weekend amid renewed fears over the Omicron variant causing a slowdown in global economic activity. The market mood improved at the start of the week, however, with confirmed Omicron cases in Europe and the UK showing mild symptoms. The yellow metal couldn’t find demand as a safe haven and US Treasury bond yields edged higher.

  2. On Tuesday, markets, once again, turned risk-averse after the CEO of Moderna said that current vaccines were likely to be ineffective against the new variant and added that it would take “months before pharmaceutical companies can manufacture new variant-specific jabs at scale.” Gold managed to stage a decisive rebound and climbed above $1,800. However, FOMC Chairman Jerome Powell’s hawkish remarks provided a boost to the greenback and forced gold to erase its daily gains.

  3. On Wednesday, the data from the US revealed that employment in the private sector increased by 534,000.

  4. The US Bureau of Labor Statistics reported on Friday that Nonfarm Payrolls (NFP) increased by 210,000 in November, missing analysts' estimate of 550,000 by a wide margin.

News to Follow

  1. The economic docket won’t be featuring any high-impact data releases in the first half of the week and the risk perception could continue to drive financial markets. On Friday, the US Bureau of Labor Statistics will release Consumer Price Index (CPI) figures for November. The annual core CPI is expected to edge lower to 4.3% from 4.6% in October. When the October CPI print surpassed the market expectation, gold shot higher with the initial reaction. We could see a similar reaction in case the report reveals that the CPI continued to increase in November. A hot inflation reading, however, would also provide a boost to the dollar, not allowing gold to capitalize on the data.

Short-Term Outlook

  • On the upside, XAU/USD could target $1,758, $1,744 and $1,738.

  • First support now aligns at $1,770, $1,784 and $1,802.