Gold price rebounds swiftly from over one-week low; focus remains on US NFP report
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Gold price witnessed an intraday turnaround from over a one-week low touched on Friday.
A softer risk tone, geopolitical risks, and trade war fears benefit the safe-haven commodity.
Bets for a less dovish Fed might cap gains for the XAU/USD ahead of the US NFP report.
Gold price (XAU/USD) rebounds after touching a one-and-half-week low during the Asian session on Friday and climbs to a daily high, above the $2,640 level in the last hour. Any meaningful appreciating move, however, seems elusive ahead of the US Nonfarm Payrolls (NFP) report, which will be looked upon for the interest rate outlook in the US and provide a fresh impetus to the non-yielding bullion. Nevertheless, the commodity remains on track for a second consecutive week of decline.
The closely watched US jobs data will guide the Federal Reserve (Fed) policymakers on their next monetary policy decision later this month, which, in turn, will drive the US Dollar (USD) and provide some meaningful impetus to the non-yielding Gold price. In the meantime, hopes that the US central bank will adopt a cautious stance on cutting rates, amid expectations that US President-elect Donald Trump's policies could reignite inflation, turn out to be a key factor undermining the XAU/USD.
Meanwhile, bets that the Fed will lower borrowing costs at its December policy meeting keep the USD bulls on the defensive near a multi-week low. This, along with persistent geopolitical risks stemming from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East, along with concerns about Trump's tariff plans and a softer risk tone, offer some support to the safe-haven Gold price. This, in turn, warrants caution for bearish traders heading into the key US data risk.
Gold price benefits from safe-haven demand, suppressed US bond yields, subdued USD demand
The recent remarks from several influential FOMC members, including Federal Reserve Chair Jerome Powell on Wednesday, suggested that the US central bank could pause its rate-cutting cycle.
This, in turn, drags the non-yielding Gold price to over a one-week low on Friday, though a combination of factors offers some support to the bullion and helps limit any further depreciating move.
Russia has shown no sign of fatigue in a nearly two-year-old conflict with Ukraine and pounded the country’s east during the past week with long-range weapons and sustained ground assaults.
Concerns about US President-elect Donald Trump's trade tariffs and their effect on the global economic outlook temper investors' appetite for riskier assets and lend support to the safe-haven XAU/USD.
According to the CME Group's FedWatch Tool, traders are pricing in a 70% chance that the Fed will lower borrowing costs by 25 basis points at the December meeting and a 30% probability of a pause.
Rate cuts bets held broadly steady after the US Department of Labor (DoL) reported on Thursday that Initial Jobless Claims rose to 224K for the week ended November 29, from 215K in the previous week.
The benchmark 10-year US Treasury yield languishes near its lowest level since October 22 and keeps the US Dollar depressed near a multi-week low, offering additional support to the precious metal.
Investors keenly await the release of the US Nonfarm Payrolls (NFP) report, which might offer cues about the Fed's rate-cut path and determine the near-term trajectory for the USD and the commodity.
Gold price needs to surpass the $2,655 horizontal barrier for bulls to seize near-term control
From a technical perspective, an intraday breakdown below the 100-period Simple Moving Average (SMA) on the 4-hour chart and a short-term trading range support near the $2,633-2,632 area was seen as a key trigger for bearish traders. The subsequent swift recovery, however, warrants some caution before positioning for any further losses. Meanwhile, any further move up is likely to confront some resistance near the $2,649 region ahead of the $2,655 supply zone. Some follow-through buying beyond last Friday's swing high, around the $2,666 area will shift the bias in favor of bulls and allow the Gold price to reclaim the $2,700 mark.
On the flip side, the Asian session low, around the $2,614-2,613 region, now seems to act as immediate strong support ahead of the $2,605-2,600 area. This is followed by the 100-day SMA, currently around the $2,583 zone, below which the Gold price could slide to the November monthly swing low, around the $2,537-2,536 area. The downward trajectory could extend further and eventually drag the XAU/USD to the $2,500 psychological mark.
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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* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
