Gold Price Forecast: XAU/USD eyes a sustained move above $2,450 and US Nonfarm Payrolls

Gold price is gathering pace to resume the recent upside early Friday, following a flattish close on Thursday. Gold price needs to find acceptance above the $2,450 barrier but its next price direction depends upon the US Nonfarm Payrolls data release.

US Nonfarm Payrolls and Middle East tension in focus

Gold price witnessed a lackluster performance on Thursday, as markets assessed the implications of the dovish US Federal Reserve (Fed) policy outlook and the escalating Middle East geopolitical tensions between Iran and Israel.

Even though odds for a 50 basis points (bps) Fed rate cut in September rose, and there was widespread risk aversion, Gold price failed to capitalize, as investors rushed to safety in the US Dollar (USD) instead.

Risk-off flows remained in vogue, courtesy of the heightening Middle East tensions. New York Times reported that Iranian Supreme Leader Ali Khamenei has ordered a direct strike on Israel for the killing of Hamas chief Haniyeh. Meanwhile, Israel confirmed on Thursday the killing of Hamas military chief Mohammed Deif after days of suspense.

Later in American trading, risk aversion intensified after the US ISM Manufacturing PMI showed further contraction and raised worries over the health of the US economy. The flight to safety mode spiked up the demand for the Greenback and the US government bonds, weighing heavily on the US Treasury bond yields, with the benchmark 10-year rates giving up the 4.0% key level.

US ISM Manufacturing PMI declined from 48.5 to 46.8 in July, falling below the expected 48.8. New orders dropped from 49.3 to 47.4. Downbeat US data ramped up bets for a 50 bps September Fed rate cut to 31%, compared to 12% seen a day before. Dovish Fed expectations offset the broad US Dollar comeback, cushioning the downside in Gold price.

Early Friday, Gold price is finding fresh demand from a pause in the US Dollar upsurge, as traders refrain from placing fresh bets on the buck in the lead-up to the all-important US labor market data. The US NFP report holds more significance this time around, especially after the US central bank tweaked its policy statement on Wednesday to say that it is "attentive to the risks to both sides of its dual mandate", rather than previously only noting its attention to inflation risks.

The US economy is likely to have added 175K jobs in July after registering a 206K job gain in June. The Unemployment Rate is seen steadying at 4.1% while the annual Average Hourly Earnings are set to rise by 3.7% in July, following June’s 3.9% increase.

Gold price technical analysis: Daily chart

Weak headline NFP print combined with soft wage inflation could bolster 50 bps rate-cut bets for September by the Fed, triggering a fresh Gold price rally.

In such a case, Gold price could retest the July 18 high of $2,475, above which the lifetime highs of $2,484 will be in focus.

Gold buyers, however, need to find a daily candlestick close above the previous record high of $2,450 for a sustained uptrend.

The 14-day Relative Strength Index (RSI) is gradually edging higher while above the 50 level, currently near 61.75, suggesting that upside risks remain intact for Gold price.

Conversely, Gold price could fall sharply to the previous resistance-turned support at $2,425 should the employment data outpace market expectations and pour cold water on big Fed rate cuts.

The next downside target is aligned at the 21-day Simple Moving Average (SMA) at $2,410. Additional declines could challenge the confluence support near $2,370, where July 29 lows meet with the 50-day SMa and the 100-day SMA.