Gold Price Forecast: XAU/USD grinds higher past $1,800 amid upbeat yields, focus on NFP

Update: Gold (XAU/USD) remain lackluster around the daily high near $1,807, up 0.06% intraday, as markets portray the typical pre-NFP sluggish sessions.

Also adding to the trading filters is the mixed blend of performance by the US Treasury yields and stock futures. That said, the US 10-year Treasury yields rise 1.5 basis points (bps) to 1.842%, bracing for the first weekly gain in three. Further, S&P 500 Futures rise 1.0% around 4,510 whereas stocks in the Asia-Pacific region are mostly weak, except for South Korea’s KOSPI, at the latest.

It should be noted, however, that the escalating inflation pressure and recent actions by the ECB and the BOE keep gold buyers on the edge amid firmer Treasury yields and the US dollar’s likely consolidation.

However, it all depends upon today’s US Nonfarm Payrolls (NFP), expected 150K versus 199K prior, due to the negative surprise from US ADP Employment Change for January, to -301K versus +207K forecast.

End of update.

The price of gold settled in the spot market on Thursday back in the $1,800's. It made a high of $1,809 and printed a low of $1,788.68. Central banks were the theme and the hawkishness has stripped the yellow metal down a level. The Bank of England and the European Central Banks are firming up on monetary policy, in line with the Fed which is raising the opportunity cost of holding non-yielding bullion.

However, besides the hawkishness at central banks, the US dollar has come unstuck this week from the Fed-bid. A chorus of Fed officials, weaker jobs data and a slide in ISM services from the prior month is weighing on the greenback that fell below 96 DXY on Thursday. 

Following an initial drop, gold has found some solace ahead of  Friday's US Nonfarm Payrolls data. This ''will be keenly watched by precious metal market participants, but we expect a weak jobs print is unlikely to sway the Fed from its decisively hawkish tone,'' analysts at TD Securities explained. However, the analysts also argued that ''a weaker-than-expected NFP report would reinforce the recent USD selloff.''

''It works through two channels: rates and risk. Risk sentiment would likely welcome easier financial conditions, especially if Omicron explains the growth weakness. That said, our dashboard shows the USD reaching oversold levels again so we use this recent pullback as a buying opportunity ahead of next month's Fed meeting.''

Related to gold, the analysts explained that they ''expect the central bank to look past recent weakness as being related to Omicron's fallout, which suggests the precious metals complex will remain under pressure. Indeed, quantitative easing has influenced all asset prices by boosting liquidity premiums, which ignites fears that quantitative tightening will particularly weigh on asset prices including gold.''

The analysts added that ''with this market framework in mind, prices are vulnerable to a deeper consolidation in support of our tactical short gold position. With that said, CTAs have also resumed liquidations, and could once again target a net short position if markets fail to hold above $1803/oz on the day.

Gold technical analysis

As stated at the start of the week's analysis in the Chart of the Week, ''should this playout, and if the bears commit ... additional supply could be the straw that breaks the camel's back for a sizeable continuation to crack the trendline support as follows:

Gold live market

The wick to the downside could draw in some subsequent offers and the NFP's could be the catalyst. With that being said, if the greenback buckles again, then the focus should be on the upside for a deeper correction towards the higher Fibonaccis. 

The M15 DXY chart is offering a bearish bias as follows:

I the prior analysis, however, it was stated that '' if the US dollar continues on its southerly trajectory, then the neckline of the M would be the last defence for a restest of the wedge resistance the $1,850's once again'':