Gold Price Forecast: XAU/USD upside appears limited ahead of Friday’s US Nonfarm Payrolls

  • Gold price is consolidating the previous recovery above $2,020 early Thursday.
  • US Dollar is sitting at three-week highs, as US Treasury bond yields look to stabilize.
  • Gold price looks vulnerable on the 4H chart, focus shifts to US Nonfarm Payrolls.

Gold price is holding the previous recovery above $2,020 early Wednesday, as sentiment remains weak and the United States Dollar (USD) takes a breather from a three-day uptrend. The focus shifts to the US weekly Jobless Claims data on Thursday, as Gold traders gear up for Friday’s all-important Nonfarm Payrolls release.  

All eyes remain on US jobs data for fresh Gold price impetus

Gold price is trading with caution even though Asian stocks remain in the red, as the US Treasury bond yields have paused their run of losses in Thursday’s trading so far. However, Gold price appears to find some support from a steady US Dollar.

The US Dollar has entered a phase of upside consolidation, having hit a new three-month high against its main competitors on Wednesday at 104.23. The Greenback extended its winning streak, despite falling US Treasury bond yields, as traders ramped up interest rate cut bets for other central banks.

Markets are pricing around an 85% chance that the ECB will cut interest rates at the March meeting while the odds of the Reserve Bank of Australia (RBA) being done with its hiking cycle also rose after this week’s dovish pause.

Downbeat US ADP Employment Change data also failed to deter the Dollar bulls. The US  Private payrolls rose by 103,000 jobs last month, the ADP Employment Change data showed on Wednesday, with the previous figure revised lower to show 106,000 jobs added instead of 113,000. The market consensus was for a 130K increase.

Markets now await Friday’s crucial US Nonfarm Payrolls data for fresh insights on the state of the labor market. The data is set to have a significant impact on the US Federal Reserve (Fed) interest rate outlook, eventually influencing the US Dollar and Gold valuations. Economists are expecting the US economy to have added 185K jobs in November, as against 150K added in October.

In the meantime, the US weekly Jobless Claims could offer some fresh trading incentives to Gold traders. Gold price could likely stay supported amid increased expectations of global monetary policy easing next year.

Gold price technical analysis: Four-hour chart

As observed on the four-hour chart, Gold price is making lower highs while facing a sustained selling pressure near the 50-Simple Moving Average (SMA) at $2,037.

The 21 SMA is on track to pierce the 50 SMA from above, which if materializes will confirm a Bear Cross.

Adding credence to the downside bias in the near term, the Relative Strength Index (RSI) indicator remains below the midline.

Therefore, the immediate support is seen at the ascending 100 SMA at $2,010, below which the $2,000 threshold will be threatened.

Gold sellers will target the 200 SMA at $1,992 on additional declines.

Alternatively, Gold buyers need to find a strong foothold near the $2,037-$2,040 region, where the 21 and 50 SMAs hang around.

A firm break above the latter will challenge the $2,050 psychological barrier, followed by the $2,100 threshold.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

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