Gold price extends the range play near multi-month low, focus remains on US Payrolls data


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  • Gold price struggles to capitalize on its modest intraday positive move to the $1,825 area on Friday.
  • Bets for more Fed rate hikes in 2023, elevated US bond yields and a bullish USD continue to weigh.
  • Traders now look forward to the release of the crucial US NFP report for a fresh directional impetus.

Gold price (XAU/USD) extends its consolidative price move for the third successive day on Friday and remains confined in a range, just above a seven-month low touched the previous day. The precious metal's inability to attract any buying interest, meanwhile, supports prospects for an extension of the recent steep decline. Bearish traders, however, seem reluctant to place fresh bets and prefer to wait for the release of the crucial monthly employment details from the United States (US).

The widely known Nonfarm Payrolls (NFP) report is due later during the early North American session and will play a key role in driving market expectations about the Federal Reserve's (Fed) future rate-hike path. This, in turn, should provide a fresh directional impetus to the Gold price. In the meantime, bets for at least one more Fed rate hike in 2023 remain supportive of elevated US bond yields, which lends support to the US Dollar (USD) and should cap gains for the precious metal.

Market participants seem convinced that the Fed will stick to its hawkish stance in the wake of resilient US macro data, which remain consistent with expectations for solid growth in the third quarter. Hence, any positive surprise from US jobs data would mean more pressure on wages and inflation, which should put additional pressure on the Fed to keep rates higher for longer. This, in turn, should boost the USD and trigger a fresh leg down for the US Dollar-denominated Gold price.

Daily Digest Market Movers: Gold price remains confined in a multi-day-old trading band

Gold price continues with its struggle to register any meaningful recovery and hangs near a fresh seven-month low touched on Thursday as traders look to the crucial US NFP report.
The US economy is expected to have added 170K jobs in September, less than the 187K in the previous month, while the jobless rate is anticipated to tick down to 3.7% from 3.8% in August.
The benchmark 10-year US Treasury bond yield holds steady near a 16-year peak on the back of hawkish Fed expectations and underpins the US Dollar, capping gains for the XAU/USD.
Fed officials on Thursday showed little concern about the recent surge in the US bond yields and said that it could actually help the central bank in its fight against persistently high inflation.
Fed officials have been warning that rates are likely to stay elevated, though the markets are pricing in less than a 40% chance of another rate hike before the end of this year.
Thursday's US macro data showed that Weekly Jobless Claims rose moderately to 207K last week, though it remained around recent lows and pointed to still-tight labour market conditions.
The continued tightness in the labour market could exert upward pressure on inflation and necessitate additional interest rate hikes by the US central bank, favouring the USD bulls.

Technical Analysis: Gold price seems poised to weaken further below the $1,800 mark

The occurrence of a death cross, with the 50-day Simple Moving Average (SMA) falling below the key 200-day SMA for the first time since July 2022, signals the potential for further weakness in the Gold price. That said, the Relative Strength Index (RSI) on the daily chart still points to near-term oversold conditions and makes it prudent to wait for a further near-term consolidation or a modest bounce before the next leg down. Nevertheless, the technical setup remains tilted firmly in favour of bearish traders and suggests that the path of least resistance for the XAU/USD is to the downside.

From current levels, any subsequent move up might continue to confront stiff resistance near the $1,830-$1,832 supply zone, above which a bout of a short-covering rally could lift the Gold price to the $1,850 hurdle. The recovery momentum could extend further, though it is more likely to remain capped near the $1,858-1,860 strong barrier. On the flip side, the $1,815-1,813 area, or a multi-month low, now seems to have emerged as an immediate strong support. This is followed by the $1,800 round-figure mark, which if broken decisively will expose the next relevant support near the $1,770-1,760 region.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.04% 0.06% 0.02% -0.08% 0.15% 0.06% 0.06%
EUR -0.04%   0.02% -0.02% -0.13% 0.12% 0.03% 0.03%
GBP -0.06% -0.02%   -0.04% -0.13% 0.08% 0.01% 0.01%
CAD -0.01% 0.02% 0.04%   -0.09% 0.13% 0.04% 0.05%
AUD 0.07% 0.11% 0.11% 0.09%   0.22% 0.15% 0.14%
JPY -0.15% -0.10% -0.08% -0.15% -0.24%   -0.08% -0.09%
NZD -0.06% -0.02% -0.01% -0.04% -0.15% 0.08%   0.00%
CHF -0.07% -0.03% -0.01% -0.05% -0.15% 0.09% 0.00%  

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).

Nonfarm Payrolls FAQs

What are Nonfarm Payrolls?

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

How does Nonfarm Payrolls influence the Federal Reserve monetary policy decisions?

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

How does Nonfarm Payrolls affect the US Dollar?

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

How does Nonfarm Payrolls affect Gold?

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Sometimes Nonfarm Payrolls trigger an opposite reaction than what the market expects. Why is that?

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

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