• Gold is now in the balance of the NFP numbers on Friday.
  • The market is taking into consideration a more hawkish tilt at the Fed.
  • Technically, the price is at a critical juncture and a breakout could be imminent one way or the other.

Update: Gold prices extend the previous session’s decline on Friday and trade with substantial losses. The prices remain on the verge to break the broader trading range of $1,810 and $1,830 amid the solid recovery of the greenback. The US Dollar Index trades near the weekly tops around 92.30. The move is primarily driven by the hawkish comments from US Federal Reserve Vice Chair Richard Clarida, who said given the conditions for an interest rate hike could be met in late 2022 or early 2023. The higher interest rates raise the opportunity cost of holding non-interest yielding gold. The higher USD valuations make gold more expensive for holders of other currencies. The downside in the precious metal is capped on the assumptions of the uneven global economic recovery due to the rapid increase in the delta variant.  

At the time of writing, the price of gold is back above the psychological $1,800 level at $1,804.60, albeit still down by 0.40%.

The price has fallen on the data from a high of $1,814.92 to a low of $1,797.90. 

The dollar hit eight-day highs on Thursday after hawkish remarks from senior US Federal Reserve officials at the same time that investors are focused on whether some of that stimulus could be rolled back.

Following the disappointing US ADP job numbers on Wednesday, gold had a knee-jerk response, jumping to $1,831 amid falling yields, but was unable to sustain these gains after further hawkish comments from Fred officials.

 Last Friday, it was James Bullard.  Early this week, it was Fed's, Christopher Waller.  

Yesterday, it was Vice-Chair Clarida who is usually more dovish, which made his comments and twist of tone very important ahead of this week's Nonfarm Payrolls data.. 

 “If my baseline outlook does materialize, then I could certainly see supporting announcing a reduction in our purchases later this year,” Clarida said.

The “necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022,”  he added arguing that the inflation outlook risks are to the upside. 

 ''He rarely dissents from the Fed's chairman, Jerome Powell, and so we view this as a sign that the Fed Chair is also moving in this direction,'' analysts at Brown Brothers Harriman said. 

Meanwhile, Dallas Fed President Robert Kaplan argued that the taper of the Fed's bond purchases should start soon and be gradual.

“As long as we continue to make progress in July (jobs) numbers and in August jobs numbers, I think we’d be better off to start adjusting these purchases soon.”

''For those keeping score at home, we now have Bullard, Waller, Clarida, Kaplan, and Evans pretty much on board with tapering in 2021 and rate hikes by late 2022 or early 2023.  More Fed officials will likely move into this came in the coming weeks, though this is of course data-dependent,'' that analysts at BBH, who are bullish on the US dollar, said.

Meanwhile, speculators have demonstrated little appetite for the yellow metal, even at times of risk-on and US dollar weakness.

''This is despite the Fed's Flexible Average Inflation Targeting which argues that capital should seek shelter in gold as a store of value against a prolonged period of negative real rates,'' analysts at TD Securities noted.

''Melting real rates are also failing to inspire a speculative boost to the precious metals complex.''

Gold's technical microstructure (see below) is pointing to vulnerabilities.

Eyes on NFP

Still, the gravitational pull of real rates is keeping the yellow metal supported in familiar ranges, for now, while we await the next catalyst in tomorrow's NFP report.

ADP jobs report suggests some caution is warranted, however.  

ADP missed by a mile at 330k vs. 690k and a revised 680k (was 692k) in June.

The consensus for the NFP is at 870k jobs added vs. 850k in June.  

US Jobless Claims data have been erratic lately, increasing the risk of a big NFP miss on Friday, the analysts at BBH argued. 

However, a stronger payrolls print should underpin the bullish tone in the greenback that is attempting to correct deeper into the prior bearish trend:

At the time of writing, the dollar was steady at 92.200 against an index of currencies USD after hitting an eight-day high of 92.352.

While above 92.20, it can continue to make moderate ginas, especially at the expense of currencies with dovish central banks, such as the EUR/USD which makes up the majority of the index. 

Gold still can't catch a bid

When taking into consideration the fears of a spreading delta variant across the globe, stagflation is a major risk considering the supply-side inflationary forces despite consumer consumption. 

Yet, as analysts at TD Securities note, ''gold still can't catch much of a bid.''

''With downside momentum gaining steam, modest CTA selling flow has kept some pressure on price action nonetheless,'' the analysts said.

''Yet, prices are now flirting with the threshold for a whipsaw, which could put a halt to the selling flow. However, TD Securities' forecast for a strong beat on this week's non-farm payroll data could add further momentum to the downside.'' 

Gold technical analysis

The weekly chart above shows that the price is at a critical long-term juncture and bulls need to get over the line soon if they want to prevent the bears from taking advantage of the lack of commitments at the dynamic trendline support.

Breaks of trendlines can often lead to a prolonged breakout. 

Meanwhile, from a daily perspective, for the immediate future, if the NFP data underwhelms, then a break of $1,834 could seal the deal for the bulls.

First off, the bulls need to break the 21-DMA and the neckline of the M formation at 1,811.

On the other hand, the downside is compelling.

If the data prove that the US vaccinations are bringing life back to the jobs sector at a faster rate than imagined, on USD strength, then a break of $1,790 will embed a lower for longer gold price outlook towards the $1,730s. 

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.

Feed news Join Telegram

Recommended content

Recommended content

Editors’ Picks

EUR/USD falls below 1.0500 after US NFP data

EUR/USD falls below 1.0500 after US NFP data

EUR/USD dropped below 1.0450 but managed to stage a modest rebound. The US Dollar preserves its strength against its rivals and doesn't allow the pair to gain traction after the data from the US showed that Nonfarm Payrolls rose by 263,000 in November.


GBP/USD turns south on upbeat US jobs report, trades below 1.2200

GBP/USD turns south on upbeat US jobs report, trades below 1.2200

GBP/USD lost nearly 100 pips with the immediate reaction to the upbeat November jobs report from the US and broke below 1.2200. The US Dollar Index clings to strong daily gains above 105.00 after the data showed that Nonfarm Payrolls rose by 263,000.


Gold retreats below $1,790 as US yields surge on US NFP

Gold retreats below $1,790 as US yields surge on US NFP

Gold price turned south and dropped below $1,790 in the early American session. The benchmark 10-year US Treasury bond yield is up more than 2% on the day near 3.6% after the bigger-than-expected November job growth, weighing heavily on XAU/USD.

Gold News

FTX exchange collapse, loss of $3.1 billion could have been avoided on one condition

FTX exchange collapse, loss of $3.1 billion could have been avoided on one condition

FTX exchange, founded by Samuel Bankman-Fried (SBF), has consistently made headlines over the past month for its liquidity crisis and triggering a collapse in the crypto ecosystem.

Read more

AMC advances more than 3% in premarket day after being halted

AMC advances more than 3% in premarket day after being halted

AMC stock is up 3.4% in Friday's premarket just a day after authorities halted trading due to unusual volatility. Thursday saw options volume three times higher than the 20-day average.

Read more