Gold Price Forecast: XAU/USD rebound hinges on US NFP, clear break above $1,717

Gold price (XAU/USD) picks up bids to portray a corrective pullback from the yearly low as it approaches $1,700 during Friday’s Asian session. The yellow metal’s recovery, however, remains doubtful as traders await the US Nonfarm Payrolls (NFP) and Unemployment Rate for August.

While paring the latest losses at around $1,698, the XAU/USD snaps a five-day downtrend as it bounces off the lowest levels since July 21. The recent bounce appears as the pre-NFP consolidation amid a lackluster market.

The hawkish Fedspeak and firmer US data joined downbeat concerns surrounding China to weigh on the XAU/USD prices of late.

On Thursday, US ISM Manufacturing PMI reprinted the 52.8 figure for August versus the market expectations of 52.0. Further, the final reading of S&P Manufacturing PMI for August rose past 51.3 initial estimates to 51.5, versus 52.2 prior final for July. On the same line, US Initial Jobless Claims dropped to 232K versus 248K forecast and 237K prior. Further, the Unit Labor Cost rose 10.2% QoQ during the second quarter (Q2) versus 10.7% expected while Labor Productivity dropped by 4.1% during Q2 versus the anticipated fall of 4.5% and -4.6% prior.

Elsewhere, a covid-led lockdown in China’s Chengdu city joins downbeat Caixin Manufacturing PMI to portray grim conditions for the world’s second-largest economy. On the same line could be the escalating geopolitical tension between Beijing and Washington, via Taiwan.

Additionally, Atlanta Fed President Raphael Bostic said that the Fed has work to do with inflation, a 'long way' from 2%. Also, the newly appointed Dallas Fed President Lory Logan joined the lines of hawkish fellow US central bankers while saying, “Restoring price stability is No. 1 priority.”

Amid these, Wall Street closed mixed but the US 10-year Treasury yields rose to the highest levels since late June. More importantly, the 02-year counterpart jumped to the 15-year top. It should be noted that the CME’s FedWatch Tool signals 72% chance of the Fed’s 75 basis points of a rate hike in September versus nearly 69% previously.

It’s worth noting that the US Treasury yields and the US Dollar Index (DXY) retreated from the multi-year high by the press time.

Moving on, US Nonfarm Payrolls (NFP) and Unemployment Rate for August, expected 300K and 3.5% versus 528K and 3.5% respective priors, will be crucial for gold traders.

Also read: US August Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

Gold’s sustained trading below the seven-week-old horizontal support zone, now resistance around $1,715-17, joins bearish MACD signals to keep XAU/USD sellers directed towards the yearly low of $1,680.

Following that, a lower line of the six-month-old bearish channel, close to $1,613, will be in focus ahead of the $1,600 threshold.

Meanwhile, the oversold RSI conditions hint at the corrective bounce. However, nothing matters until the quote marks an upside break of the $1,717 hurdle.

Even so, the 21-day EMA and upper line of the stated channel, respectively $1,742 and $1,758, will be crucial for the gold buyers to watch for fresh impulse.

Gold: Daily chart

Trend: Limited downside expected