Gold price remains range bound, looks to US NFP report for fresh directional impetus

출처 Fxstreet
  • Gold price remains confined in a narrow trading range amid mixed fundamental cues.
  • Geopolitical risks lend support to the metal, though the recent USD strength caps gains.
  • Traders also seem reluctant and look to the US NFP report before placing directional bets.

Gold price (XAU/USD) extends its sideways consolidative price move in a familiar range held since the beginning of the current week as traders await a fresh catalyst before positioning for the next leg of a directional move. Hence, the focus remains glued to the release of the closely-watched US monthly employment details, due later during the North American session this Friday. The popularly known Nonfarm Payrolls (NFP) report might influence expectations about the pace of the Federal Reserve's (Fed) rate-cutting cycle. This, in turn, will play a key role in driving the US Dollar (USD) demand in the near term and provide some meaningful impetus to the non-yielding yellow metal.

Heading into the key data risk, diminishing odds for a more aggressive policy easing by the Fed and an oversized rate cut at the next policy meeting in November keep the US Dollar (USD) firm near a one-month peak on Thursday. This, in turn, is seen as a key factor acting as a headwind for the Gold price. That said, a further escalation of geopolitical tensions in the Middle East and the growing risk of a broader conflict act as a tailwind for the safe-haven precious metal. Nevertheless, the XAU/USD remains within striking distance of the all-time peak touched last week.

Daily Digest Market Movers: Gold price traders remain on the sidelines ahead of the crucial US monthly jobs report

  • The US Department of Labor (DOL) reported on Thursday that the number of Americans filing applications for unemployment benefits increased marginally to 225K during the week ended September 28 as compared to the 218K previous. 
  • This comes on top of a larger-than-anticipated increase in the US private-sector employment in September and an unexpected rise in the number of available jobs in August, providing evidence of a stable and still resilient labor market.
  • Separately, the Institute for Supply Management (ISM) said that its Non-Manufacturing PMI rose to 54.9 in September, or the highest level since February 2023, suggesting that the economy remained on a solid footing in the third quarter.
  • This further tempers market expectations for another oversized interest rate cut by the Federal Reserve and lifts the US Dollar to a one-month top, which, in turn, is seen as a key factor acting as a headwind for the non-yielding Gold price. 
  • Hezbollah launched approximately 230 projectiles from Lebanon into Israeli territory on Thursday and Israel launched strikes early on Friday targeting Hezbollah's intelligence headquarters in the southern suburbs of Lebanese capital Beirut.
  • Meanwhile, Israel will reportedly carry out a very significant retaliation within days to Iran's onslaught of nearly 200 ballistic missiles on Tuesday night, raising the risk of a full-blown war and lending support to the XAU/USD.
  • Traders now look forward to the US Nonfarm Payrolls (NFP) report, which is expected to show that the economy added 140K jobs in September slightly lower than the 142K previous, and the Unemployment Rate held steady at 4.2%. 
  • This, along with Average Hourly Earnings, will be looked upon for cues about the size of the Fed rate cut in November, which will play a key role in driving the USD demand and provide a fresh directional impetus to the commodity. 

Technical Outlook: Gold price bulls have the upper hand while above the $2,625-2,624 throwback support

From a technical perspective, the range-bound price action might still be categorized as a bullish consolidation phase against the backdrop of the recent strong runup to the record peak. Moreover, oscillators on the daily chart are holding comfortably in positive territory and have also eased from the overbought zone. This, in turn, favors bullish traders and suggests that the path of least resistance for the Gold price remains to the upside. In the meantime, the $2,672-$2,673 area could offer immediate resistance ahead of the $2,685-2,686 zone, or the all-time high touched last week. This is closely followed by the $2,700 mark, which if conquered will set the stage for an extension of a well-established multi-month-old uptrend.

On the flip side, the weekly low, around the $2,625-2,624 area, which coincides with a short-term ascending channel resistance breakpoint, might continue to offer support and act as a key pivotal point. A convincing break below might prompt aggressive technical selling and drag the Gold price below the $2,600 mark, towards the next relevant support near the $2,560 zone. The corrective decline could extend further towards the $2,535-2,530 support before the XAU/USD eventually drops 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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