Gold price trades with positive bias amid dovish Fed expectations, weaker USD; lacks follow-through

  • Gold price ticks higher for the second straight day and draws support from a combination of factors. 
  • Hopes that interest rates have peaked globally act as a tailwind amid broad-based USD weakness.
  • A softer risk tone also contributes to the uptick, though bulls prefer to wait for the US NFP on Friday. 

Gold price (XAU/USD) attracts some buying for the second straight day on Thursday, albeit lacks follow-through and remains confined in a familiar range held over the past three days through the first half of the European session. The fundamental backdrop, meanwhile, seems tilted firmly in favour of bullish traders amid growing acceptance that the Federal Reserve (Fed) is done with its policy tightening campaign and will start cutting rates as early as March 2024. Furthermore, the recent dovish rhetoric from European Central Bank (ECB) officials, along with the Reserve Bank of Australia’s (RBA) and the Bank of Canada's (BoC) decision to hold rates steady, lifted hopes that interest rates have peaked globally. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal.

Meanwhile, a strong pickup in demand for the Japanese Yen (JPY) demand, bolstered by expectations for a hawkish pivot by the Bank of Japan (BoJ), prompts some profit-taking around the US Dollar (USD). In fact, the USD Index, which tracks the Greenback against a basket of currencies, corrects sharply from a two-week high touched on Wednesday and turns out to be another factor lending support to the US Dollar-denominated commodity. Apart from this, the prevalent cautious market modo turns out to be another factor contributing to the modest intraday uptick. Bulls, however, seem reluctant and prefer to wait for the release of the US monthly jobs data on Friday. 

The popularly known Nonfarm Payrolls (NFP) report will play a key role in influencing the Fed's near-term policy outlook. This, in turn, will drive the USD demand and provide some meaningful impetus to the Gold price. In the meantime, traders on Thursday might take cues from the US Weekly Initial Jobless Claims data for short-term opportunities later during the North American session. 

Daily Digest Market Movers: Gold price is underpinned by Fed rate cut bets and weaker USD

  • The weaker US employment data released this week reinforced expectations that the Federal Reserve is done raising interest rates and continues to act as a tailwind for the Gold price.
  • The Labor Department's JOLTS report showed on Tuesday that job openings fell to more than a 2-1/2-year low in October, signaling that interest rates were dampening demand for workers.
  • The ADP report also pointed to signs of a cooling jobs market and indicated that private payrolls rose by 103K in November, down from the previous month's downwardly revised reading of 106K.
  • The current market pricing suggests a two-in-three chance of a rate cut by March, which has pushed down the US bond yields to a three-month low and further lend support to the XAU/USD.
  • The mixed Trade Balance data from China showed that imports unexpectedly declined by 0.6% in November, fueling concerns about weak domestic demand amid looming recession risks.
  • Israel launched the next phase of its ground offensive against the Palestinian group – Hamas – to the south of the Gaza Strip and intensified strikes around Gaza’s second-largest city, Khan Younis.
  • The US Dollar retreats sharply from a two-week high touched on Wednesday and acts as a tailwind for the commodity, though bulls seem reluctant to place fresh bets ahead of US NFP on Friday.
  • The crucial US monthly employment details will influence the Fed's near-term policy outlook, which, in turn, will drive the USD demand and provide a fresh impetus to the commodity.
  • Traders now look to the US Weekly Initial Jobless Claims, expected to show that individuals filing unemployment insurance for the first time rose from 218K to 222K during the week of December 1.

Technical Analysis: Gold price extends the range play, bulls have the upper hand above $2,000 psychological mark

From a technical perspective, the weekly swing low, around the $2,010-2,009 area, which coincides with a horizontal resistance breakpoint, might continue to protect the immediate downside ahead of the $2,000 psychological mark. A convincing break below the latter might set the stage for an extension of this week's sharp retracement slide from the all-time peak and drag the Gold price to the $1,977-1,976 horizontal support. The corrective decline could get extended further towards the very important 200-day Simple Moving Average (SMA) currently near the $1,950 region.

On the flip side, the top end of a multi-day-old trading range, around the $2,035-2,038 area, is likely to act as an immediate strong barrier. This is followed by resistance near the $2,045 level, above which the Gold price could climb to the $2,071-2,072 area en route to the $2,100 round figure. Furthermore, the occurrence of a golden cross, with the 50-day Simple Moving Average rising above the 200-day SMA, suggests that bulls might eventually aim to retest the record high, around the $2,144-2,145 zone.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.

USD   1.16% 1.28% 0.85% 2.27% 0.26% 1.53% 0.88%
EUR -1.19%   0.13% -0.31% 1.13% -0.93% 0.39% -0.28%
GBP -1.32% -0.12%   -0.43% 1.00% -1.03% 0.26% -0.40%
CAD -0.86% 0.31% 0.44%   1.44% -0.61% 0.70% 0.03%
AUD -2.32% -1.14% -1.02% -1.46%   -2.08% -0.75% -1.43%
JPY -0.30% 0.93% 1.19% 0.62% 2.04%   1.30% 0.62%
NZD -1.56% -0.38% -0.26% -0.69% 0.75% -1.29%   -0.66%
CHF -0.89% 0.29% 0.40% -0.03% 1.40% -0.62% 0.66%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Economic Indicator

United States Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews ​and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Read more.

Next release: 12/08/2023 13:30:00 GMT

Frequency: Monthly

Source: US Bureau of Labor Statistics

Why it matters to traders

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content

Recommended content

Editors’ Picks

EUR/USD clings to daily gains above 1.0650

EUR/USD clings to daily gains above 1.0650

EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.


GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.


Gold holds steady at around $2,380 following earlier spike

Gold holds steady at around $2,380 following earlier spike

Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.

Gold News

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in

Bitcoin price shows no signs of directional bias while it holds above  $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research. 

Read more

Week ahead – US GDP and BoJ decision on top of next week’s agenda

Week ahead – US GDP and BoJ decision on top of next week’s agenda

US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.

Read more