Gold Price Forecast: XAU/USD finds acceptance above $4,000, but US NFP holds the key
- Gold holds the previous recovery above $4,000 as all eyes turn to US Nonfarm Payrolls.
- The US Dollar pulls back sharply on pre-NFP profit-taking and optimism linked to US-Iran talks.
- Gold’s technical setup suggests a ‘sell-on-bounce’ trade amid bearish RSI and Death Cross.
Gold is looking to build on its previous recovery beyond the $4,000 mark early Thursday, with the next big move hinging on the critical US Nonfarm Payrolls (NFP) data release.
Gold: Will US NFP strengthen the recovery?
Gold holds positive momentum for the second straight day, having found fresh buyers around the $3,950 region or seven-month lows on several occasions.
The ongoing upswing in Gold is mainly sponsored by the overnight pullback in the US Dollar (USD), particularly after the US ISM Manufacturing PMI disappointed with 53.3 in June and Federal Reserve (Fed) Chairman Kevin Warsh downplayed inflation concerns.
Warsh said he’s been encouraged by the recent easing of inflation expectations, but quickly added that the central bank will deliver on its price stability mandate.
The new Fed Chair delivered a moderately hawkish message, with an FXS SpeechTracker score of 5.6/10 that cannot be benchmarked relative to the historical average but still signals a clear focus on price stability. The key remark that the Fed will “chart a new course” while refusing to give forward guidance underscores a shift toward data-dependent, flexible policymaking, even as Warsh stresses that inflation above 2% will disappoint the central bank and highlights AI as a potentially pivotal, yet still-assessed, driver of future price dynamics. Warsh’s emphasis on steady labor markets, a solid supply side, and declining inflation expectations reinforces a tone of cautious confidence rather than outright dovishness.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-hawkish level of 123.64, indicating that the speech did not materially alter the market’s perception of Fed policy bias. The combination of a stable, elevated index reading and a mid-range FXS Speechtracker score suggests that markets continue to see the Fed as firmly committed to containing inflation, even as Warsh refrains from offering explicit forward guidance.
These drivers knocked off the USD alongside the short-term US Treasury bond yields, allowing the non-yielding bullion to stage a decent comeback.
The latest leg down in the Greenback is driven by renewed optimism around the US-Iran peace talks. Qatar said late Wednesday that “meetings in Doha through mediators between US and Iranian negotiators made "positive progress” on issues tied to the memorandum of understanding (MoU), with both sides agreeing to continue discussions, per CNN News.
However, risks remain skewed to the downside for Gold as traders eagerly await the US labor market report on Thursday, which is expected to reaffirm expectations of at least two Fed rate hikes this year. The US celebrates Independence Day on Friday, and thus, the US job report will be released this Thursday.
Markets currently price in about 80% odds of a rate hike in September, according to the CME Group’s FedWatch Tool, with two more hikes expected before the year ends.
The US economy is likely to have added 110,000 jobs in June after a solid increase of 172,000 in May. The Unemployment Rate is set to remain unchanged at 4.3% in the reported period.
A stronger-than-expected headline NFP reading could bolster hawkish Fed rate hike bets, boosting the USD and US Treasury bond yields at the expense of Gold.
On the other hand, a downside surprise in the print could prompt markets to scale back Fed rate hike bets, providing additional legs to the Gold price recovery from multi-month troughs.
It’s worth noting that Gold dived over 3% in response to the blockbuster May NFP report.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,062.07, extending its decline well below all major moving averages and maintaining a bearish near-term bias. Spot gold remains capped by the 21-day simple moving average (SMA) at $4,176.10, with the 50-day SMA near $4,411.79 and the 200-day SMA at $4,483.53 reinforcing a dense overhead supply zone. The longer-term 100-day SMA at $4,643.11 stays far above price, hinting at a broader downtrend, while the Relative Strength Index (14) at 38.56 shows weak momentum but stops short of oversold conditions, suggesting sellers still control the tape.
Further backing the downside, the Death Cross remains in play after the 50-day SMA closed below the 200-day SMA on a weekly closing basis last Friday.
On the topside, immediate resistance appears at the 21-day SMA around $4,176, followed by the 50-day SMA at $4,412 and the 200-day SMA near $4,484, where any recovery would likely struggle. A deeper extension towards recent lows would leave the metal without clearly defined moving-average supports in the current dataset, meaning traders may have to rely on emerging price action and potential horizontal levels to identify fresh demand zones.
(The technical analysis of this story was written with the help of an AI tool.)
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.
