Gold prices held steady on Wednesday as investors were cautious ahead of U.S. jobs data due later this week, but prices were set to post their worst month since November 2016 on the U.S. Federal Reserve’s shift to a hawkish policy stance.

Spot gold rose 0.08%to $1762.03 per ounce by 11:50(GMT+8).

Gold slipped on Tuesday to its lowest since mid-April as the dollar strengthened in the run-up to this week’s U.S. jobs report, which is expected to come in strong and could cement the Federal Reserve’s recent hawkish stance.

Spot gold fell 0.93% to $1,761.66 per ounce by 01:39 pm EDT after touching $1,749.20, its lowest since April 15.

In addition to a stronger dollar, some investors are likely anticipating better-than-expected jobs data, said Bob Haberkorn, senior market strategist at RJO Futures.

“The calls for interest rates to trend higher are going to be much louder from the Fed if we do get a better-than-expected jobs number,” weighing on gold, Haberkorn said.

The U.S. Labor Department’s nonfarm payrolls data on Friday is expected to show a gain of 690,000 jobs this month, compared with 559,000 in May, according to a Reuters poll.

The data is due after comments from Richmond Fed President Thomas Barkin, who suggested the Fed had made “substantial further progress” in its inflation goal in order to begin tapering asset purchases.

Growing signs that point to a sooner-than-expected U.S. interest rate hike and the preceding tapering should heap more downward pressure on gold, potentially bringing it down to $1,730, Han Tan, chief market analyst at Exinity Group said.

The dollar index rose 0.2%, making gold more expensive for other currency holders.

But, a broader data disappointment trend could eventually support gold as the market reflects on continued economic risks at a time when markets have priced a first rate hike from the Fed in December 2022, TD Securities said in a note.

This week's two main headwinds are a stronger U.S. dollar and higher U.S. Treasury yields in the marketplace that is not seeing a lot of risk aversion.

"A stronger dollar and rising interest rates on the day are seeing gold continue to bleed lower. Gold is in need of a catalyst to re-energize the market, as the lack of impetus to buy the yellow metal in the aftermath of the FOMC continues to suggest the bar is low for continued weakness," said strategists at TD Securities.

This is a good time for the dollar because the U.S. is seen as the best place to be during the pandemic due to its quick vaccine rollout, said Karen Jones, team head of FICC technical analysis research at Commerzbank. "The U.S. is now the best place to be during the pandemic due to its fast and expansive vaccine rollout stemming what was once the world's worst outbreak," Jones wrote.

The quick spread of the Delta variant in other countries is providing additional support for the dollar by drumming up its safe-haven quality.

"Fear that the new mutation of the COVID virus will slow the global recovery has sent ripples across the global capital markets. The foreign exchange market has the clearest reaction, and the dollar is bid," noted Bannockburn Global Forex chief market strategist Marc Chandler.

Gold has been having a tough time since it failed to breach the $1,900 an ounce level at the beginning of June. The technical position worsened after the mid-June selloff that was triggered by a hawkish Federal Reserve statement, which signaled two potential rate hikes as soon as 2023.

Fed officials also sound more confident this week, with Federal Reserve Bank of Richmond President Thomas Barkin stating on Monday that the central bank has made "substantial further progress" toward its inflation goal in order to begin tapering.

All eyes are on the U.S. employment report, which is scheduled to be published Friday morning.

"Jobs data Friday will be the highlight for the week. Consensus sees 700k jobs added vs. 559k in May, with the unemployment rate expected to fall a tick to 5.7%," said BBH Global Currency Strategy head Win Thin. "As things stand now, we continue to expect a tapering announcement over the summer, with actual tapering by end-2021 and rate hikes by end-2022."

A few things at play could turn this bearish gold price action around, including disappointing macro data out of the U.S., which could stall the Fed's tapering talks.

"As far as what could be a positive catalyst for gold, a broader data disappointment trend could eventually prove to offer support, as the market reflects on continued economic risks at a time when rates markets have priced a first hike in December 2022," TD Securities strategist added.

However, the real pace of inflation will remain distorted for months to come, which will make it hard to tell whether or not the Fed is pricing in its inflation expectations correctly.

"While this offers hope for gold, underlying inflation trends will likely remain distorted for months, while the potential for a stronger jobs report this week could also inhibit positive flows into gold for now," the strategists wrote. "In this context, gold is not completely out of the woods just yet, with prices now quickly dropping toward the $1,730/oz region, which would open the door to another round of CTA selling."

Trading strategy (Source: Trading Central)

Pivot: 1768.00

Our preference: short positions below 1768.00 with targets at 1750.00 & 1741.00 in extension.

Alternative scenario: above 1768.00 look for further upside with 1779.00 & 1786.00 as targets.

Comment: as long as the resistance at 1768.00 is not surpassed, the risk of the break below 1750.00 remains high.

Supports and resistances:

1786.00

1779.00

1768.00

1762.55 Last

1750.00

1741.00

1728.00

Guideline for Trading Central strategy

Trend chart reading guideline

1. First look at the time period in the upper left corner of the chart：

‧30MIN and 1H chart shows the trading suggestions for intraday

‧Daily chart shows the market trend analysis in next 2-3 days

2. The blue horizontal line on the chart marks the pivot: pivot indicates the reversal of the market. When the price is above the pivot, it indicates an upward trend, when the price is below the pivot , it indicates a downward trend. When the price breaks through the pivot, the trend is reversed.

3. The red and blue thin curves in the K-line chart are technical indicators: Red line is  MA20+Bollinger bands, Blue line is MA50. under the K-line chart are also the technical indicators:  Blue line is RSI, Red line is 9MA;

4. The green horizontal line is the resistance level for a price increase, and is also the profit target for long orders; the red horizontal line is the support level for a price decrease, and is also the profit target for short orders.

How to use TC strategy？

1.[Pivot] is the reversal line of the market trend. When the price up the pivot line which means in Bullish, you can open a long position or Buy. on the contrary, when the price under pivot line which means in bearish. You ‘d better make short positions or Sell. 

2. [our preference] is the main trading suggestion for your reference. You can exit your trading refer to this target or close positions before it.

3. [Alternative scenario] is the plan B for your reference. 

4. [Comment] is the technical analysis of market trends and technical support for trading strategies. 

5. [Supports and resistance] Supports are levels where the price tend to find support as it falls.

Resistances are levels where the price tend to find resistance as it rises. So, exit before the trend reverse.