Gold Forecast: Seen in the range of USD 1180-1225 ahead of Nonfam Payrolls

Gold prices rose to a high of USD 1219.4/Oz levels this week and appears poised to end higher for the second consecutive week.

The metal shot higher from the low of USD 1142.6/Oz, after the surprisingly dovish Fed policy statement was released in the last week. The resulting weakness in the US dollar, which got amplified by short covering in the EUR/USD pair helped the yellow metal rise to a high of USD 1219.4/Oz.

However, we are down to USD 1200/Oz levels as we head closer to the end of trading this week. In the last two trading sessions of this week, we saw the US dollar rebound, mainly on account of a drop in the weekly jobless claims data to a six-week low. The better-than-expected UK services PMI data also helped the greenback recover lost ground. In the process, gold was pushed lower to USD 1200/Oz. The risk aversion in the equity markets and the geopolitical uncertainty in the middle east also eased.

During the next week, we have the US non-farm payrolls data for March due for release. Apart from the Fed’s concern regarding the US dollar, this is the single data piece that could alter the rate hike expectations significantly. Investment bank Goldman Sachs already called a top in the payrolls figure, indicating the pace of job additions could slow down in the future.

Gold range USD 1180-1225 ahead of NFP

Prices are likely to trade in the range of USD 1224.9 (50% Fib retracement of 1307.3-1142.6) – USD 1181.4 (23.6% Fib retracement) ahead of the Friday’s Non-farm payrolls report.

The losses could be restricted at USD 1181.4-

  • • Though we have seen a rebound in the USD, a significant appreciation can be ruled out as the treasury yields are likely to remain weak on the Fed’s weak growth forecasts and due to the weaker-than-expected Q4 GDP data.

  • The equity markets are unlikely to see a sudden rise in risk-on sentiment as investors stay cautious ahead of the NFP report. Thus, Gold could remain supported amid caution ahead of NFP.

  • The disappointing Chinese final PMI readings for March could support the yellow metal.

  • Safe haven flows may increase if Greece issue or tensions in middle east escalate further.

On the other hand, gains could be restricted at USD 1224.9-

  • The European Central Bank, at its April meeting, is likely to sound optimistic regarding the recovery in the Eurozone economy. Meanwhile, another disappointing figure of weekly bond purchases by the ECB could also restrict gains in the yellow metal.

  • The repeated failure in the EUR/USD and the GBP/USD around 1.10 and 1.5 is likely to keep the USD strong. Moreover, the upbeat Eurozone final PMIs may not be sufficient to push the USD significantly lower.

  • Caution ahead of the Non-farm payrolls report, which has beat estimates by a wide margin on the last few occasions- will keep big traders on the sidelines ahead of the report.

A breakout from the range is anticipated post the release of Friday’s non-farm payroll report. A weaker-than-expected figure – below 230K could push Gold well above USD 1224.9/Oz by Friday’s New York closing. We can expect the metal to test and consolidate around the 61.8% retracement at USD 1244.3/Oz.

On the other hand, another stellar jobs report, could push the metal below USD 1181.4/Oz. However, the bearish interest rate forecasts and the downward revisions of the growth forecasts are likely to restrict losses around USD 1165-1170/Oz levels.

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