Gold sticks to gains below two-week top; looks to US NFP for a fresh impetus
- Gold regains positive traction and moves back closer to an over two-week high set on Thursday.
- Hopes for a US-Iran peace deal counter renewed hostilities and undermine the safe-haven USD.
- Diminishing odds for a Fed rate hike also support the bullion as traders await the US NFP report.
Gold (XAU/USD) struggles to capitalize on its intraday move higher and remains below an over two-week high through the first half of the European session on Friday.
Nevertheless, the commodity seems poised to register strong gains for the first time in three weeks as the focus remains on the US jobs data, due later this Friday. Despite renewed hostilities in the Strait of Hormuz, investors seem hopeful over a potential US-Iran peace deal. This triggers a fresh leg down in Crude Oil prices, easing inflationary concerns and tempering bets for a more hawkish US Federal Reserve (Fed). The outlook, in turn, keeps a lid on any further US Dollar (USD) appreciation and turns out to be a key factor acting as a tailwind for the bullion.
The US Central Command said Thursday that US forces targeted Iranian military facilities responsible for launching attacks against warships transiting through the strategic waterway. Earlier, Iran accused the US of violating the ceasefire by striking multiple targets in and around the strait. However, US President Donald Trump stated that a ceasefire with Iran is still in place and added that it would be obvious if the ceasefire was over. Moreover, the US military stated that US forces do not seek escalation, undermining the USD's reserve currency status and supporting the Gold price.
Meanwhile, the latest development fails to assist Crude Oil prices to capitalize on Thursday's goodish intraday move up, though the downside seems cushioned amid geopolitical uncertainties. In fact, Trump warned that US forces will hit a lot harder and more violently if Iran doesn’t sign a deal soon. Moreover, continued economic growth and inflation fears have forced investors to push back their expectations for rate cuts by the US Fed to late 2027 or early 2028. This, in turn, should limit deeper USD losses and cap the upside for the Gold as traders keenly await the US monthly employment details.
The popularly known US Nonfarm Payrolls (NFP) report is due for release later during the early North American session and is expected to show that the economy added 62K new jobs in April. This would mark a significant slowdown from the previous month's reading of 178K. Meanwhile, the Unemployment Rate is forecast to hold steady at 4.3%, while Average Hourly Earnings might have risen by 3.8% YoY in April. Nevertheless, the data will further play a role in influencing expectations about the Fed's policy stance, which, in turn, will drive the USD and provide a fresh impetus to the Gold price.
XAU/USD 4-hour chart
Gold consolidates before the next leg up as bullish potential seems intact
The XAU/USD pair is holding a clear bullish bias as it sits above the 200-period Simple Moving Average (SMA) and above the 61.8% Fibonacci retracement level of the latest upswing. Furthermore, momentum indicators remain constructive. The Relative Strength Index (RSI) at 64.24 stays in positive territory without yet being deeply overbought, while the Moving Average Convergence Divergence (MACD) (12, 26, 9) prints a positive reading near 6.13. This hints that upside momentum is still in play, albeit less aggressive than during the prior leg higher.
On the downside, the 23.6% retracement at $4,703.51 has turned into immediate support, followed by the 200-period SMA at $4,665.16, with deeper retracement cushions emerging at $4,587.31 (38.2%) and $4,493.39 (50.0%) if a broader correction unfolds. On the topside, the next significant resistance appears at the swing-anchor near $4,891.35, and as long as the Gold price holds above the $4,700 area, pullbacks are likely to be viewed as corrective within the prevailing uptrend.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
