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 EUR GBP CAD AUD JPY NZD CHF
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.

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