Gold price extends the range play as the key US jobs data looms large

  • Gold price trades with a positive bias for the second straight day, albeit lacks follow-through. 
  • A positive risk tone caps gains for the metal amid the uncertainty over the Fed’s rate-hike path.
  • Traders now look to the crucial US Nonfarm Payrolls (NFP) data for some meaningful impetus.

Gold price (XAU/USD) trades with a positive bias for the second straight day on Friday and sticks to its intraday gains through the first half of the European session. Expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle and start cutting rates in June 2024 lead to a further decline in the US Treasury bond yields. This, in turn, is seen weighing on the US Dollar (USD) and lending some support to the non-yielding yellow metal. 

Apart from this, geopolitical tensions in the Middle East and China's economic woes further contribute to the bid tone around the safe-haven Gold price. That said, a generally positive tone around the equity markets holds back bulls from placing fresh bets and keeps the precious metal below the $2,000 psychological mark. Investors also seem reluctant ahead of the US jobs report, which could provide cues about the Fed's rate-hike path and provide a fresh impetus to the XAU/USD.

Daily Digest Market Movers: Gold price struggles to capitalize on its uptick ahead of US NFP report

  • Gold price oscillates in a familiar trading band held over the past three days, awaiting a fresh catalyst before the next leg of a directional move.
  • Bets that the Federal Reserve will not hike rates any further led to the recent fall in the US Treasury bond yields and undermined the US Dollar.
  • The US economic resilience and still sticky inflation keep the door open for one more Fed rate hike move either in December 2023 or January 2024.
  • Fed Chair Jerome Powell noted that some slowing in the labor market will likely need to happen in order for inflation to continue its downward trajectory.
  • Hence, the US monthly jobs data, or the NFP report, might influence the Fed's next policy move and provide some meaningful impetus to the XAU/USD.
  • The US economy likely added 180K jobs in October, down from the 336K in the previous month, and the jobless rate is seen holding steady at 3.8%.
  • Any meaningful divergence from expected numbers is likely to infuse volatility in the financial markets and drive demand for the safe-haven metal.
  • The Middle East conflict and China's economic woes should continue to act as a tailwind for the commodity, despite a generally positive risk tone.
  • China's Caixin Services PMI improved to 50.4 in October from 50.4 previous, though falls short of consensus estimates and fails to ease worries about an economic slowdown. 
  • At current levels, the precious metal remains on track to register modest weekly losses and snap a three-week winning streak to over a five-month high touched last week.

Technical Analysis: Gold price remains well within the striking distance of a multi-month peak

From a technical perspective, nothing seems to have changed much for the Gold price and any subsequent move up is more likely to confront stiff resistance near the $2,000 mark. The next relevant hurdle is pegged near the $2,008-2,010 area, or the multi-month peak touched last Friday. Bulls need to wait for a sustained strength beyond the said barrier before positioning for a move towards the next relevant barrier near the $2,022 region.

On the flip side, the $1,980 region now seems to protect the immediate downside ahead of the weekly low, around the $1,970 level set on Wednesday. Some follow-through selling might expose the $1,964 intermediate support before the Gold price eventually drops to the $1,954-1,953 region.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.

USD   -0.59% -0.70% -0.90% -1.43% 0.42% -1.51% 0.40%
EUR 0.58%   -0.11% -0.31% -0.84% 1.00% -0.93% 0.97%
GBP 0.70% 0.12%   -0.23% -0.74% 1.12% -0.82% 1.09%
CAD 0.92% 0.30% 0.20%   -0.52% 1.30% -0.61% 1.28%
AUD 1.39% 0.85% 0.73% 0.51%   1.83% -0.08% 1.82%
JPY -0.42% -1.00% -1.05% -1.35% -1.87%   -1.95% -0.02%
NZD 1.50% 0.91% 0.80% 0.61% 0.08% 1.90%   1.88%
CHF -0.40% -0.99% -1.10% -1.30% -1.83% 0.02% -1.92%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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