Gold Price Forecast: XAU/USD erases NFP-inspired gains, returns to $1,760 area


  • Gold shot higher in the early American session on Friday.
  • 10-year US Treasury bond yield erased all of its daily gains after dismal jobs report.
  • Initial resistance aligns at $1,780 ahead of $1,787. 

Update: Following the impressive upsurge to a fresh 15-day high of $1,781, the XAU/USD pair lost its traction and pared the majority of its daily gains. At the time of press, gold was virtually unchanged on a daily basis at $1,757. The initial market reaction to the uninspiring September labour market caused US Treasury bond yields to push lower and made it tough for the greenback to find demand. However, the benchmark 10-year US T-bond yield staged a sharp U-turn and renewed multi-month highs at 1.605%, forcing XAU/USD to reverse its course. Meanwhile, the US Dollar Index registers small losses but manages to hold above 94.00. 

After spending the majority of the day near $1,760, the XAU/USD pair gathered bullish momentum in the early American session and was last seen trading at its highest level since September 22 at $1,778, rising 1.3% on a daily basis.

Following August's disappointing jobs report, the data published by the US Bureau of Labor Statistics showed on Friday the labour market struggled to recover in September. Nonfarm Payrolls (NFP) rose by 194,000 and missed the market expectation of 500,000 by a wide margin. 

Although the underlying details of the publication showed that August's print got revised higher to 366,000 from 235,000 and the Unemployment Rate declined to 4.8%, the greenback struggled to stay resilient against its rivals.

In addition to the renewed USD weakness, the sharp U-turn witnessed in US T-bond yields also provided a boost to XAU/USD. The benchmark 10-year US T-bond yield, which advanced to its strongest level since early June at 1.6% earlier in the day, is currently flat at 1.573%.

Commenting on the NFP data, "the Fed's bar for changing its mind is high," noted FXStreet Analyst Yohay Elam. "Despite high chances for the bank to print fewer dollars, there is room for the greenback to fall in the short term."

NFP Quick Analysis: Three reasons for dollar bears to party, even if tapering remains intact.

Gold technical outlook

On the four-hour chart, the Relative Strength Index (RSI) indicator is closing on the overbought territory, suggesting that the pair could have a difficult time pushing higher before staging a technical correction. Former static resistance at $1,770 now aligns as the first technical support. In case XAU/USD holds above that level, it will need to clear the 200-period SMA at $1,780 before targeting $1,787 (September 22 high).

On the flip side, a daily close below $1,770 could attract sellers. Below that level, $1,755 (100-period SMA) could be seen as the next support ahead of $1,745 (static level).

 

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