Gold Price Forecast: XAU/USD loses momentum to near $2,650 on renewed US Dollar demand

Gold price attracts some sellers to $2,650 in Monday’s early Asian session.
US Nonfarm Payrolls rose by 254,000 in September vs. 159,000 prior, better than expected.
Rising Middle East geopolitical tensions could boost the safe-haven flows, benefiting the Gold.

Lallalit Srijandorn FXStreet

Gold price (XAU/USD) trades in negative territory for the fourth consecutive day near $2,650 on Monday during the early Asian session. The further upside in the US Dollar (USD) after the upbeat US Nonfarm Payrolls (NFP) on Friday exerts some selling pressure on the yellow metal.

The NFP in the United States climbed by 254,000 in September, according to the Bureau of Labor Statistics on Friday. The figure topped was above August's revised 159,000 and above the market consensus of 140,000. The Unemployment Rate ticks lower to 4.1% in September, down from 4.2% in August. These encouraging US reports dampen the hopes that the US Federal Reserve (Fed) will cut the deeper interest rate, which lifts the Greenback and weighs on the USD-denominated Gold price.

Chicago Federal Reserve Bank President Austan Goolsbee said on Friday that he thinks the recent employment data was "superb" and noted that additional reports like this would increase his confidence that the US economy has reached full employment with low inflation.

On the other hand, the escalating geopolitical tensions in the Middle East might boost the price of gold, a traditional safe-haven asset. Israel struck Hezbollah targets in Lebanon and the Gaza Strip on Sunday ahead of the one-year anniversary of the October 7 attacks that launched the conflict. Israel's defense minister proclaimed all possibilities for reprisal against Iran.

(This story was corrected on October 7 at 3:10 GMT to say in the article that the Unemployment Rate was down from 4.2% in August, not 2.4%, and to say that the US Nonfarm Payrolls were better than expected.)

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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