Gold Price Forecast: XAUUSD remains non-committal below $1,750, awaiting US NFP

Gold Price is in a downside consolidation after hitting nine-month lows.
Ex-Japan PM Abe shot, triggers risk-aversion and lifts the US dollar.
23.6% Fibo is the level to beat for XAUUSD bulls but NFP holds the key.

Dhwani Mehta FXStreet

Gold Price is giving back the early recovery gains, as bulls face stiff rejection just below the $1,750 barrier once again. An unexpected negative shift in risk sentiment on news that ex-Japanese Prime Minister Shinzo Abe was shot in the chest at an election campaign speech in Nara. He was immediately taken to hospital but reportedly he was showing no vital signs. The fateful incident rekindled the demand for the US dollar as a safe-haven asset, which capped the renewed uptick in the yellow metal. The risk-off flows returned, reflective of the fresh weakness in the S&P 500 futures and the US Treasury yields. Softer yields are helping gold price stay afloat.

Despite the latest leg down in the bright metal, the moves remain restrictive, as traders refrain from placing any aggressive directional bets in the run-up to the all-important US Nonfarm Payrolls release. The US economy is seen adding 268K jobs in June vs. +390K in May. Meanwhile, America’s Unemployment Rate is expected to hold steady at 3.6% in the reported month. A slowdown in the US jobs creation alongside the wage growth could discourage the Fed to go on an all-out aggressive tightening spree. In such a case, the USD-price gold could catch fresh bids in an immediate reaction to the data release. Although a tighter labor market may justify the US central bank’s rapid and bigger rate-hike stance, reviving recession fears. The greenback is likely to remain in a win-win situation, irrespective of the NFP outcome. A slew of Fed speeches will also have a significant impact on the USD valuations, eventually affecting gold price.

On Thursday, XAUUSD paused its sell-off, as the dollar consolidated near 20-year highs vs. its main competitors amid an improvement in the market mood. Investors reassessed recession risks, in the wake of the hawkish FOMC minutes. Political uncertainty emanating from the UK PM Boris Johnson’s resignation also helped the bullion to find a floor. However, the relief rally across the global stock markets and the rebound in the US yields limited the recovery attempts in the metal. Hawkish commentary from Fed Governor Christopher Waller (voter, hawk), backing a 75 bps rate hike in June, also deterred gold bulls.

Gold Price Chart: Daily

As observed on the daily chart, the recovery in gold price remains capped below $1,751, which is the 23.6% Fibonacci Retracement (Fibo) level of this week’s sell-off from $1,815 levels.

Daily closing above the latter is required to initiate any meaningful recovery from multi-month troughs of $1,732. Further up, the 38.2% Fibo level at $1,763 will challenge the bearish commitments.

Powerful resistance at $1.770 will be the next stop for XAU bulls. That level is the confluence of the psychological mark and the 50% Fibo level of the same decline.

The 14-day Relative Strength Index (RSI) is flattening while within the oversold territory.

On the downside, the $1,732 will be the initial support, below which the rising channel target at $1,722 will come into play. A sustained move below the latter will expose the $1,700 threshold.

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.

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