Gold climbs on softer US Dollar ahead of NFP
- Gold edges higher near $5,100 as a softer US Dollar supports prices ahead of NFP.
- Fed rate-cut bets and US data remain the main market drivers.
- Technically, XAU/USD holds a mild bullish technical bias above the $5,000 level.
Gold (XAU/USD) edges higher on Wednesday as a softer US Dollar (USD) lends support to prices. At the time of writing, XAU/USD trades around $5,103, up about 1.45% on the day, with attention turning to the delayed US jobs report.
The January Employment Situation Report, which was originally scheduled for last Friday, was delayed due to the partial US government shutdown and is now set for release at 13:30 GMT. Economists expect Nonfarm Payrolls (NFP) to rise by 70K in January, up from 50K in December. Average Hourly Earnings are expected to rise by 0.3% MoM and 3.6% YoY, while the Unemployment Rate is forecast to remain unchanged at 4.4%.
The data could provide a fresh directional impulse for the Bullion, as any downside surprise in the labour market or earnings figures would strengthen expectations that the Federal Reserve (Fed) could resume cutting interest rates sooner rather than later. This would likely weigh further on the USD and lend support to the non-yielding metal.
In contrast, a stronger-than-expected jobs report could exert some near-term downward pressure on the Bullion by cooling expectations for early Fed rate cuts and giving the Greenback a temporary lift.
However, any downside is likely to remain limited, as broader macro drivers, including persistent geopolitical and economic risks and strong central bank demand, continue to underpin the metal’s overall outlook.
Market movers: US Dollar slides as rate-cut expectations grow ahead of NFP and CPI
- US President Donald Trump reiterated his call for lower interest rates in an interview with Fox Business on Tuesday, saying the US should have “the lowest interest rates in the world,” and again criticized Jerome Powell, calling him “so bad” and saying interest rates should be cut by around two percentage points.
- The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, slides to a fresh weekly low near 96.50, hovering close to its lowest level since January 30.
- On the monetary policy front, markets currently expect around two interest rate cuts from the Fed this year, with those expectations reinforced by recent soft economic data. Retail Sales were unchanged in December at 0.0% MoM, undershooting expectations for a 0.4% increase. Meanwhile, last week’s JOLTS survey showed job openings fell to 6.542 million, marking their weakest level since 2020.
- According to the CME FedWatch Tool, markets see a 49% chance that the first Fed rate cut will come in June. However, a softer-than-expected NFP print later on Wednesday, followed by weak Consumer Price Index (CPI) data on Friday, could increase the odds of an April cut, which currently stand at 36%.
- In addition, comments from Fed officials on Monday were in focus. Cleveland Fed President Beth Hammack said policymakers “could be on hold for quite some time” and stressed that it is important to see inflation return to 2% before changing interest rates again. Meanwhile, Dallas Fed President Lorie Logan said it would take “further material cooling” in the labour market for additional rate cuts to be appropriate.
Technical analysis: XAU/USD remains supported above $5,000
From a technical perspective, XAU/USD maintains a mild bullish bias, with buyers gradually gaining traction after successfully defending the $5,000 psychological level.
On the 4-hour chart, price hovers just below the upper Bollinger Band at $5,117.43, and a sustained break above this level would likely extend the current advance.
The Relative Strength Index (RSI), at 61, is rising and remains in bullish territory, pointing to improving momentum. On the downside, initial support is seen at the 20-period Simple Moving Average (SMA), which also marks the mid-Bollinger Band, around $5,019.75.
The Bollinger Bands are narrowing, signalling a contraction in volatility and a coiling phase. Trend strength remains weak, with the ADX at 10.56, suggesting that a sustained directional move would likely require a fresh catalyst, with the US Nonfarm Payrolls report in focus.
Failure to clear the upper band could trigger a pullback toward the $5,019.75-$4,922.06 support zone. Conversely, a decisive upside break would likely encourage band expansion and keep the near-term path pointed higher.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
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.
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.
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.
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.
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