Gold Price Forecast: XAU/USD edges higher above $4,100 ahead of delayed US September NFP report

Gold price drifts higher to near $4,110 in Thursday’s early Asian session.
Traders brace for the US September NFP report, which was delayed by a 43-day government shutdown.
Fed officials are divided about the path forward for interest rates.

Lallalit Srijandorn FXStreet

Gold price (XAU/USD) attracts some buyers to around $4,110 during the early Asian session on Thursday. The precious metal gains momentum amid the cautious mood and uncertainty over the US economy. Traders will closely monitor the US September Nonfarm Payrolls (NFP) later on Thursday.

Heightened economic uncertainty, including a delay in key jobs reports due to a recent government shutdown, has complicated the Federal Reserve’s (Fed) assessment of the labor market. This, in turn, boosts the safe-haven asset like Gold. All eyes will be on the delayed September jobs report, which could provide insight into the health of the US labor market and offer more clues about the path of US interest rates.

A weaker-than-expected report might increase the likelihood of a December rate cut and lift the yellow metal. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.

On the other hand, waning expectations of a Federal Reserve (Fed) rate cut next month could exert some selling pressure on the non-yielding gold. The minutes from the Federal Open Market Committee’s (FOMC) October 28-29 meeting showed that Fed officials are divided and cautious about the path forward for interest rates.

While the committee decided on a 25 basis point (bps) rate cut, it was a divided decision, with some members leaning against another reduction in the December meeting. Markets are now pricing in nearly a 30% chance of a Fed rate cut next month, down from around 60% odds last week, according to the CME FedWatch tool.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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