Gold Price Forecast: Gold Falls Below $4,100, Can October Nonfarm Payrolls Fuel Another Rally?

TradingKey - As of the Asian session on Friday (November 6), gold prices (XAUUSD) pulled back following consecutive rebounds, dropping about 0.85% intraday to trade near $4,050. Earlier, gold climbed to as high as $4,147.06 on Thursday, hitting a more than two-week high, before giving back some gains. Recent weakness in the US dollar and retreating US Treasury yields have provided support for gold, but with the US October nonfarm payrolls report due to be released, market focus on the Federal Reserve's December interest rate policy has heated up once again.

US Nonfarm Payrolls Expected to Rebound Moderately as Fed December Rate Hike Expectations Face Test

In terms of market expectations, US October nonfarm payrolls are projected to increase by 65,000, up from 29,000 in September, with the unemployment rate expected to hold steady at 4.2%. Average hourly earnings are forecast to rise 0.3% month-over-month, higher than September's 0.1%, while the year-over-year increase is expected to slow to 2.9% from 3.0%. Overall, the market expects US employment growth to improve from September, though the scale of job gains remains relatively modest.

Previously released employment data has already shown certain signs of improvement. US October ADP private-sector employment increased by 86,000, surpassing the market expectation of 69,000. Meanwhile, for the week ended October 31, US initial jobless claims fell to 189,000, the lowest level since mid-July, indicating that corporate layoffs remain subdued.

It should be noted that ADP and the official nonfarm payroll report differ in statistical methodology, meaning one cannot directly assume nonfarm payrolls will inevitably beat expectations. Therefore, in addition to headline job gains, the unemployment rate, average hourly earnings, and the magnitude of revisions to data for the prior two months also warrant close attention.

The Federal Reserve kept interest rates unchanged at its October policy meeting, but US inflation remains above the 2% target. Recently, as international oil prices retreated significantly, market concerns that energy costs would further stoke inflation have eased, leading US Treasury yields and the US dollar to weaken in tandem. According to the CME FedWatch Tool, market expectations for the probability of a December Fed rate hike have dropped to around 68.4%.

If October nonfarm payrolls fall short of expectations while the unemployment rate rises and wage growth moderates, the market may further lower expectations for a December rate hike, pushing the US dollar and Treasury yields lower and creating favorable conditions for gold to continue its rebound.

Conversely, if headline job additions significantly exceed expectations and wage growth picks up concurrently, it would indicate that the US labor market remains highly resilient, and the market could once again raise the probability of a Fed rate hike by year-end. In that scenario, the US dollar and Treasury yields could move higher, thereby limiting the room for gold's rebound.

Gold Price Technical Analysis

Gold price daily chart, Source: TradingView

Looking at gold's daily chart, although the price briefly moved above $4,100 on Thursday and reached a high of $4,147.06, it still closed below $4,100, reflecting strong resistance at that level. Consequently, gold has retreated under pressure today, indicating that short-term bullish momentum in the market has somewhat exhausted.

Currently, gold may continue to pull back in the short term, with key initial support to watch below near $4,030, followed by the $4,000 threshold. If this level fails to hold, gold could continue lower to test support near $3,975; however, if signs of stabilization emerge above this level, gold could rebound in the short term.

On the upside, the primary resistance level to watch is $4,100. If gold can strongly break through and sustain above this level, it will continue upward to test resistance near $4,150. Consolidating above this mark would pave the way for a further test of the $4,200 resistance level, followed by $4,230 above. Only when gold breaks through this level can it be expected to mount a challenge toward the $4,300 resistance mark.