Gold Price Forecast: Stellar Nonfarm Payrolls beat keeps US dollar bid and XAU hamstrung

The US employment report in Nonfarm Payrolls has been released, albeit taking a backseat to the fundamental crisis in Russia's invasion of Ukraine.

With a wave of Omicron COVID-19 variant infections significantly diminished, the market was expecting another strong jobs number. This would be underpinning the certainty of a rate hike from the US Federal Reserve that meets this month. 

The data arrived as follows:

• US Change in Nonfarm Payrolls Feb: 678K (est 423K; prev 467K).
• US Unemployment Rate Feb: 3.8% (est 3.9%; prev 4.0%).
• US Average Hourly Earnings (Y/Y) Feb: 5.1% (est 5.8%; prev 5.7%).
• US Average Hourly Earnings (M/M) Feb: 0.0% (est 0.5%; prev 0.7%).

The data has boosted the US dollar that was already at a fresh weekly high of 98.6320 prior to the release, as measured against a basket of currencies in the DXY index. After an initial blip to the downside on the release in the knee-jerk, it has since moved to make a higher high of 98.68 at the time of writing. 

However, gold prices also rose on Friday, eyeing their best weekly gain since May 2021. Spot gold edged up to $1,950s in an up and down Asian session after news of a fire near a Ukraine nuclear facility. Investors sought refuge in safe-haven US dollar, US Treasuries, sending yields on benchmark 10-year yields lower to 1.7000% as well as gold. 

Asian equities and the euro slumped on Friday while the heightened investor fears about the escalating conflict sent oil prices higher. A fire broke out in a training building near the Zaporizhzhia nuclear power plant, the largest of its kind in Europe. The fire was extinguished and while that has helped ease some of the initial panics that hit markets in Asia, investors remain extremely anxious about the conflict which can help to support gold prices. 

In Europe, the STOXX index of 50 companies remains in the red and down by some 3% at the time of writing, hitting a new low for the year as the benchmark eyed correction territory, meaning down 10% from its highs. The MSCI All Country stocks index shed 0.6% to 686 points, down about 10% for the year.

In currency markets, the euro lost further ground and was set for its worst week versus the dollar in nearly two years. EUR/CHF is less than 50 pips away from parity. The prospect of sustained high commodity prices continued to drag on expectations of European economic growth, which is underpinning the US dollar and represents a headwind for gold prices. 

Gold technical analysis

The price has reached a prior resistance level on the hourly chart and is being bought from there, near a 61.8% Fibonacci retracement level. Further demand would be expected to see the price of gold extend higher in the forthcoming hours and for the open sessions next week.