Gold Weekly Forecast: Bulls’ commitment will be tested after key US data
- Gold closed the week in negative territory despite a late rebound.
- The technical outlook points to sellers’ hesitancy in the near term.
- Key employment data from the US and geopolitical headlines could continue to impact Gold prices.
Gold (XAU/USD) declined sharply on easing geopolitical concerns on Monday and spent the rest of the week trying to recover its losses. Employment-related macroeconomic data releases from the US could alter the expectations about the Federal Reserve’s policy decision in December and trigger the next big action in XAU/USD.
Gold suffers heavy losses on improving risk mood
Gold started the week under heavy bearish pressure as risk flows dominated the action in financial markets following the news of US President-elect Donald Trump nominating fund manager Scott Bessent as the US Treasury Secretary. Assessing the market reaction to this development, "the market view that Bessent is a “safe hands” candidate, may see some relief rally in Treasuries from the open on Monday, as the risk of a more unorthodox candidate is priced out," noted Societe Generale analyst Stephen Spratt. "We suspect his view that tariffs should be "layered" and that initial levels being discussed are “maximalist” positions," he added.
Although the selling pressure surrounding the US Dollar (USD) and falling US Treasury bond yields helped Gold limit its losses during the European trading hours, easing geopolitical tensions caused XAU/USD to continue to push lower in the second half of the day on Monday. Following reports of Israel and Hezbollah reaching a ceasefire agreement, Gold extended its slide and lost nearly 3% on a daily basis.
After stretching lower toward $2,600 early Tuesday, Gold managed to find a foothold and closed the day marginally higher. As the benchmark 10-year US Treasury bond yield dropped to its lowest level in nearly a month below 4.3% on Wednesday, Gold continued to edge higher and posted gains for the second consecutive day.
Meanwhile, the persistent weakness of the USD following the mixed macroeconomic data releases helped XAU/USD hold its ground midweek. The US Census Bureau reported that Durable Goods Orders increased by 0.2% on a monthly basis in October, missing the market expectation of 0.5%. The Department of Labor announced that Initial Jobless Claims declined to 213,000 in the week ending November 23 from 215,000 in the previous week. Finally, the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, rose 2.3% on a yearly basis, up from 2.1% in September and in line with the market consensus, while the annual core PCE inflation edged higher to 2.8% from 2.7%.
Financial markets in the US remained closed in observance of the Thanksgiving Day holiday on Thursday, causing Gold to fluctuate in a tight range. The 10-year yield extended its weekly slide after bond markets returned to action early Friday, allowing XAU/USD to gather bullish momentum and rise above $2,650.
Gold investors’ shift focus to US labor market data
The US economic calendar will feature employment-related macroeconomic data releases next week, which could drive the market pricing of the Fed’s rate decision at the last policy meeting of the year.
On Wednesday, Automatic Data Processing will publish the private sector employment data. Markets expect private payrolls to rise by 166,000 in November. A positive surprise in this data could revive optimism about an upbeat Nonfarm Payrolls (NFP) reading on Friday and cause Gold to edge lower.
Following the 12,000 increase recorded in NFP in October, because of hurricanes and labor strikes, investors forecast a decisive rebound, with a print of 183,000 in November. A figure above 200,000 could feed into expectations for a Fed policy hold in December and boost US T-bond yields, hurting Gold prices. On the flip side, a disappointing print, at or below 150,000, could keep the hopes for another 25 basis points (bps) rate cut alive, opening the door for a leg higher in XAU/USD ahead of the weekend.
According to the CME FedWatch Tool, markets are currently seeing about a 65% probability of the Fed lowering the policy rate to the range of 4.25%-4.5% next month.
Gold technical outlook
The Relative Strength Index (RSI) indicator on the daily chart stays slightly above 50, reflecting a lack of bearish pressure. On the upside, the Fibonacci 23.6% of the uptrend coming from June and the 50-day Simple Moving Average (SMA) form the first resistance area at $2,670. In case Gold rises above this level and starts using it as support, technical buyers could show interest. In this scenario, $2,700 (static level, round level) could be seen as the next hurdle before $2,720 (static level) and $2,760 (static level).
Looking south, first support could be spotted at $2,600 (Fibonacci 38.2% retracement) ahead of $2,570 (100-day SMA) and $2,540 (Fibonacci 50% retracement).
Gold FAQs
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.
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.
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.
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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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
