Gold Weekly Forecast: A key week with US NFP at the centre of the debate

Gold (XAU/USD) extended its positive performance this week, hitting all-time tops in levels just shy of the $2,700 mark per ounce troy on Thursday.

The rally in the precious metal remained propped up by, firstly, steady expectations of extra interest rate reductions by the Federal Reserve (Fed) in the upcoming couple of meetings and well into 2025, and secondly, incessant geopolitical concerns stemming mainly from the Middle East, while the Russia-Ukraine conflict also adds to the matter.

Last but not least, contributing to the uptrend in bullion, also emerged the equally persevering offered stance of the US Dollar (USD).

Next on tap… $3,000?

As the US Dollar approaches its third consecutive week of losses, Gold prices are set to mark their third straight week of gains.

Since late June, traders have continued to shift towards the non-yielding metal pari passu growing expectations of Fed interest rate cuts, which culminated in a significant 50-basis-point (bps) reduction at the Fed’s meeting on September 18.

However, market participants did not seem quite satisfied with the Fed's outsized move. That said, investors still expect around 75 bps of easing by the central bank for the remainder of the year, according to the CME FedWatch tool.

Looking at the longer run, investors expect between 100 and 125 bps of interest rate reductions by the end of 2025.

Against this backdrop, it is not surprising that the yellow metal could have already embarked on a probable visit to the key $3,000 level, which will apparently hit sooner rather than later. However, the current overbought market conditions might call for some common sense, allowing some short-term corrective decline.

At this point, and in light of the strong rally observed in Gold prices, a “purge” would be more than welcomed by those afraid of entering the market at current levels, at the same time giving another chance to those part of the fear of missing out (FOMO) space.

Geopolitical effervescence continues to support the uptrend

Another driver of the important move higher in the precious metal is the unabated geopolitical jitters surrounding the Israel-Hamas crisis, as well as the Russia-Ukraine conflict, which will likely enter its third year in February.

The flight-to-safety adage comes to the fore every time news hits the wires about the deterioration of any of these scenarios, which unfortunately do not appear to be over any time soon.

And the US Dollar?

The Greenback has been on a firm bearish leg since July, accompanied by increasing speculation of extra monetary policy easing by the Fed. Now that the central bank has started its rate cut cycle, and with inflation kind of firmly navigating towards the 2% target, hopes for a sustained recovery of the US Dollar seem to dim on a daily basis, at least in the near future.

Gold technical outlook

As we mentioned above, Gold’s current overbought conditions, as per the daily RSI around 75, leave the door open for a near-term correction.

However, the constructive outlook appears to be everything but abated. That said, there is an immediate up-barrier at the record peak of $2,685 (Thursday’s high) and the round-level of $2,700. Once this level is surpassed, the Fibonacci extensions of the 2024 uptrend emerge at $2,876, seconded by $2,975 and then $3,119.

Let’s say sellers regain some initiative. In this scenario, there is an initial contention at the weekly low of $2,546 (September 18), which comes ahead of the September low of $2,471 (September 4) and precedes the transitory 100-day SMA at $2,428.

From a technical perspective, the metal’s positive outlook should remain unchanged as long as it trades above the key 200-day SMA at $2,288.