Gold Price Forecast: XAU/USD edges higher to $1,840 area, upside seems capped ahead of US NFP

Gold price attracts some dip-buying on the last day of the week and stalls its retracement slide from the highest level since June 2022, around the $1,865 area touched on Wednesday. The XAU/USD maintains its bid tone through the early European session and is currently placed near the top end of the daily range, just below the $1,840 level.

The intraday uptick in Gold price could be attributed to some repositioning trade ahead of the release of the closely-watched US monthly jobs data. The popularly known NFP report will play a key role in influencing the Fed's rate hike path and help determine the next leg of a directional move for the non-yielding yellow metal. In the meantime, a strong follow-through buying around the US Dollar could keep a lid on any meaningful upside for the Dollar-denominated commodity.

The USD continues to draw support from Thursday's better-than-expected US macro data, which pointed to a resilient US labour market and could allow the Federal Reserve to stick to its aggressive rate hike path. In fact, Automatic Data Processing (ADP) reported that the US private sector employers added 235K jobs in December against consensus estimates for a reading of 150K. Furthermore, Initial Jobless Claims unexpectedly declined to 204K last week.

This comes on the back of a hawkish tone from the minutes of the Federal Open Market Committee (FOMC) December meeting, showing that policymakers were set to keep interest rates higher for longer. Moreover, Federal Reserve officials reiterated on Thursday that they were still focused on bringing inflation back to the 2% target. Heading into the key data risk, the Fed's hawkish outlook should contribute to capping Gold price and warrants caution for bullish traders.

Technical levels to watch