Gold Weekly Forecast: Falling US yields, geopolitics help XAU/USD hold ground
- Gold registers weekly gains, supported by geopolitics and falling US yields.
- The technical outlook points to a bullish bias, but lacks momentum.
- Investors will focus on geopolitics and key US data releases.
Gold (XAU/USD) gained traction and climbed above $5,200, ending the fourth consecutive week in positive territory. The next round of US-Iran talks and crucial macroeconomic data releases from the US will be watched closely by market participants in the short term.
Gold benefits from retreating US yields
Gold opened with a bullish gap and registered daily gains on Monday as investors reacted to United States (US) President Donald Trump’s response to the Supreme Court’s ruling against his administration's tariffs on Friday. Trump vowed that they will impose even bigger levies using alternative legal frameworks, specifically citing national security conventions under Section 301 of the Trade Act of 1974. Over the weekend, the US president said that he will raise global tariffs to 15% from 10% "effective immediately" and warned that additional ones would follow.
After extending its rally to a fresh February-high above $5,200 in the early trading hours of the Asian session on Tuesday, Gold reversed its direction and closed the day in the red as the negative impact of the US trade policy uncertainty on risk mood faded away.
While delivering his State of the Union speech in the early trading hours of the Asian session on Wednesday, Trump noted that there is no inflation and said he sees "tremendous growth," pointing to tariffs as one of the main reasons behind the economic turnaround. Trump further added that almost all trading partners want to keep the trade deals they already made, despite the Supreme Court's ruling. As Wall Street’s main indexes shot higher midweek, the US Dollar (USD) struggled to find demand and allowed XAU/USD to register daily gains.
Gold struggled to make a decisive move in either direction on Thursday. In the absence of high-impact economic data releases, retreating US Treasury bond yields helped XAU/USD hold its ground. The benchmark 10-year US bond yield declined below 4% for the first time since late November. On the flip side, the precious metal’s upside remained capped early Friday as geopolitical tensions eased after news outlets reported that the US and Iran made significant progress during Thursday’s nuclear talks in Geneva.
In the second half of the day on Friday, however, re-escalating geopolitical tensions helped Gold climb above $5,200. Citing an email from the US Ambassador to Israel, Mike Huckabee, NBC News reported that the diplomat has advised nonessential staff members to leave the country immediately. “He also urged anyone intending to leave to go ahead and book flights, citing the likely surge in demand out of Israel after the embassy's move,” the outlet wrote.
Gold traders will scrutinize US data
The US economic calendar will offer critical data releases that could trigger the next directional action in Gold.
On Monday, the Institute for Supply Management (ISM) will publish the Manufacturing Purchasing Managers’ Index (PMI) report for February. In case the headline PMI comes in below 50 and points to a contraction in the manufacturing sector’s business activity, the immediate reaction could hurt the USD and open the door for a leg higher in XAU/USD.
The Automatic Data Processing (ADP) will release the private sector employment figures for February on Wednesday, followed by the ISM Services PMI. A weaker-than-expected print in the ADP Employment Change data and a decline below 50 in the ISM Services Employment Index could cause investors to prepare for a disappointing Nonfarm Payrolls (NFP) report on Friday and trigger a USD selloff. Conversely, XAU/USD could come under bearish pressure if the ADP numbers and the PMI report point to healthy labor market conditions.
The US Bureau of Labor Statistics’ (BLS) official employment report will feature the Unemployment Rate, NFP and wage inflation figures for February on Friday.
n January, NFP rose by 130K, compared to the market expectation of 70K, and the Unemployment Rate declined to 4.3% from 4.4% in December. An NFP increase of 100K or more could ease concerns over the labor market slack and boost the USD. The CME Group FedWatch Tool currently shows that markets virtually see no chance of a Federal Reserve (Fed) interest rate cut in March and price in about an 80% probability of one more policy hold in April. This positioning suggests that the USD has some room on the upside in case investors see a strong employment data as a confirmation of steady policy at least until June. In this scenario, US Treasury bond yields could recover sharply and cause XAU/USD to move south heading into the weekend.
On the other hand, a disappointing NFP print at or below 50K could cause market participants to reconsider the possibility of a rate cut in April and pave the way for a bullish XAU/USD action in the American session on Friday.
ING’s Commodities Strategist Ewa Manthey argues that structural drivers are likely to support Gold prices in the near term.
"As long as geopolitical fragmentation persists, a meaningful reversal in central bank gold demand looks unlikely. This structural floor continues to underpin the market at elevated price levels,” Manthey explains, while adding, "Our US economist expects the Fed to begin cutting rates in the second quarter, with policy becoming incrementally less restrictive over the coming quarters. Even a modest easing cycle would be supportive for Gold, lowering real yields and reducing the opportunity cost of holding non‑yielding assets."
Investors will also pay close attention to headlines from the next round of US-Iran negotiations in Vienna. US Vice President JD Vance said late Thursday that there is “no chance” the US will be involved in a prolonged war in the Middle East, but added that Trump was still weighing targeted military strikes against Iran. If the US strikes Iran to force an agreement, escalating geopolitical tensions could support Gold prices. On the flip side, a nuclear deal without any military action could have the opposite impact on the precious metal’s performance.
Gold technical analysis: Bullish bias stays intact but lacks momentum
The Relative Strength Index (RSI) on the daily chart moves sideways near 60, and Gold trades well above the 20-day Simple Moving Average (SMA), reflecting a consolidation phase within a bullish structure.
The immediate resistance could be seen at $5,300 (round level). If Gold stabilizes above this level and confirms it as support, bulls could target $5,400 (static level, round level) ahead of $5,598 (all-time high).
On the downside, $5,090-$5,100 (Fibonacci 23.6% retracement of the November-February uptrend, round level) aligns as the first support area before $4,870 (Fibonacci 38.2% retracement) and $4,790 (50-day SMA).
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
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.
