Gold Price Forecast: XAU/USD buyers take a breather ahead of the US Nonfarm Payrolls
- Gold price pauses a three-day upswing early Thursday as all eyes remain on US NFP data.
- US Dollar returns to the red as trade deal concerns loom amid dovish Fed expectations.
- The 23.6% Fibo level appears a tough nut to crack for Gold price as the daily RSI holds the midline.
Gold price is pulling back from a weekly high of $3,366 reached earlier in the Asian session on Thursday. All eyes now remain on the high-impact US Nonfarm Payrolls (NFP) data release for a clear directional impetus in Gold price.
Gold price braces for intense volatility on US jobs data
Gold price has come under fresh selling pressure amid buyers’ exhaustion after an impressive three-day recovery from monthly troughs.
The US Dollar (USD) seems to pause its overnight decline, exerting bearish pressure on the USD-denominated Gold price.
Markets are resorting to repositioning their USD shorts, following the Greenback’s downward spiral to over three-year lows against its major currency rivals.
Despite the brief relief on Wednesday, following the news that the United States (US) and Vietnam reached a trade agreement before the July 9 deadline, USD sellers returned with a bang amid renewed concerns over the US labor market.
The Automatic Data Processing (ADP) report showed on Wednesday that the US private sector payrolls dropped by 33,000 jobs last month, the first decline since March 2023, after a downwardly revised increase of 29,000 in May. The market forecast was for an increase of 95,000.
The downbeat data further fuelled expectations of an earlier interest rate cut by the Federal Reserve (Fed), with markets now pricing in about a 25% probability of a July rate cut, up from 20% seen pre-data release.
Additionally, markets continued to remain wary about the US trade deals with Japan, South Korea and the European Union (EU), keeping the Greenback’s downside potential intact.
The sustained decrease in demand for the Greenback helped Gold price build on the previous rebound on Wednesday.
Amid tariff concerns and dovish Fed expectations, the US labor data on Thursday remains critical in projecting the Fed’s path forward on interest rates.
The US NFP is expected to rise by 110K in June from 139K in May, while the Unemployment Rate is seen a tad higher at 4.3% in the same period, compared to May’s 4.2%.
If the NFP prints below the 100K level, it will reinforce fresh selling around the USD amid increased odds of a July Fed rate cut, favoring the yielding Gold price.
Meanwhile, an upside surprise could calm fears over the health of the US labor market, pushing back against expectations of aggressive Fed easing while triggering a fresh USD recovery at the expense of the Gold price.
Gold price technical analysis: Daily chart
Gold price battles the 21-day Simple Moving Average (SMA) at $3,350, as of writing, having faced rejection near $3,365 earlier on.
The 14-day Relative Strength Index (RSI) holds above the midline, currently near 52.30, keeping buyers hopeful.
That said, a dismal US jobs report is needed for Gold buyers to resume the recovery momentum toward the 23.6% Fibonacci Retracement (Fibo) level of the April record rally at $3,377.
A daily candlestick closing above that level could initiate a meaningful uptrend toward the $3,400 threshold.
Further up, the static resistance at around $3,440 will come into play once again.
In case of better-than-expected US employment statistics, Gold price could extend its pullback toward the 50-day SMA at $3,322.
If sellers crack the latter on a sustained basis, a drop toward the $3,297 38.2% Fibo level cannot be ruled out.
Deeper declines will target the monthly lows of $3,248.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
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Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
