Gold Price Forecast: XAU/USD eyes a sustained move above $1,992 on weak US Nonfarm Payrolls

  • Gold price consolidates a recovery as the United States Dollar licks its wounds.
  • A weak US Nonfarm Payrolls and soft wage inflation data are needed to revive Federal Reserve bets for a pause.
  • The $1,992 level appears a tough nut to crack for Gold buyers but a bullish RSI could lend support.

Gold price is treading water above the $1,970 level ahead of the release of United States Nonfarm Payrolls (NFP), with the US Dollar (USD) licking its wounds in the face of an upbeat market mood and mixed US economic data releases.  

United States Nonfarm Payrolls in the spotlight

The US Dollar tumbled across the board on Thursday, tracking the persistent weakness in the US Treasury bond yields, as mixed economic data from the United States released heightened bets of the US Federal Reserve (Fed) pausing its interest-rate hiking cycle on June 14.

ADP reported that US private sector employment increased by a seasonally adjusted 278,000 in May, well above expectations for a 170,000 increase. Meanwhile, weekly Initial Jobless Claims rose to 232,000, compared with 235,000 expected. Later in American trading, the US ISM Manufacturing PMI and its sub-components showed a contraction in May, except for the Employment Index. The quarterly Unit Labor Costs, an indicator closely watched by the Fed, declined to 4.2% vs. 6.0% expected and 6.3% previous.

Despite the strong ADP jobs report, the rest of the weak data, coupled with Philadelphia Federal Reserve Bank President Patrick Harker's dovish remarks, were enough to bolster expectations for a Fed rate hike pause. Harker said that it is time for the central bank to "hit the stop button" for at least one meeting, reiterating his comments from Wednesday.

Markets are now pricing a 74% probability of a Fed pause this month, compared with odds of about 38% seen on Monday. The benchmark 10-year US Treasury bond yields have plunged from near 3.85% to test 3.50% so far this week on renewed dovish Fed bets.  

All eyes remain on US Nonfarm Payrolls data to gauge whether a 25 basis point Fed rate hike in June is totally off the table. The data is critical to determining the next price direction in the US Dollar, as well as the USD-denominated Gold price. The US economy is likely to have created 190,000 jobs in May, compared with the more-than-expected 253,000 jobs added in April. The Unemployment Rate is foreseen at 3.5% in the fifth month of this year, up from the 3.4% seen in April. Average Hourly Earnings are seen rising at 4.4% in May on year, the same pace as in April.

Gold price technical analysis: Daily chart

The daily technical setup is turning in favor of Gold buyers, with the 14-day Relative Strength Index (RSI) flirting with the 50 level that separates the bullish and bearish zones.

However, Gold optimists continue to trade with caution amid a Bear Cross in play and ahead of the critical United States labor market report.

Should the headline US Nonfarm Payrolls disappoint markets along with softer wage inflation, Gold price is likely to extend the recovery momentum beyond the flattish 50-Daily Moving Average (DMA) resistance at $1,992.

Ahead of that, Gold price needs to take out the downward-pointing 21 DMA at $1,984. Acceptance above these resistance levels will put the $2,000 threshold back on bulls’ radars.

Weekly closing above the 50 DMA barrier is critical to sustain the turnaround in Gold price from two-month troughs.

However, in case the US jobs report suprises markets to the upside and reinstates a 25 bps Federal Reserve rate hike expectation for this month, the Bear Cross will overpower and hit Gold price toward the recent range lows near $1,953.

If the selling interest gathers steam, Gold bears could challenge the mildly bullish 100 DMA, now at $1,939.

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