Gold News: Could Strong Jobs Data Cap XAU/USD’s Upside Potential?

Gold Holds Steady as Traders Await Non-Farm Payrolls and Fed Signals

Gold prices ended the week with a modest gain of 0.67%, settling at $2639.725, as investors looked ahead to the Non-Farm Payrolls (NFP) report and upcoming Federal Reserve decisions. The market has stayed within a tight range, reflecting hesitation driven by U.S. economic data and movements in Treasury yields and the dollar​​.

Non-Farm Payrolls to Set the Tone for Fed Policy and Gold Prices

The upcoming NFP report will play a central role in shaping market sentiment. A weaker-than-expected payroll figure could increase expectations for further rate cuts by the Federal Reserve. This would likely lower Treasury yields and weaken the dollar, both of which are supportive of higher gold prices. Lower yields reduce the opportunity cost of holding gold, while a softer dollar makes it more affordable for international buyers​.

On the other hand, a strong labor market reading could reinforce the Fed’s cautious stance, limiting the likelihood of aggressive easing. This would push yields higher and strengthen the dollar, placing downward pressure on gold. The Fed has signaled that while three rate cuts were delivered in 2024, fewer cuts are expected in 2025, with only two reductions anticipated​​.

Yields and Dollar Strength as Ongoing Challenges for Gold

Rising Treasury yields have been one of the main obstacles for gold. Since October, the 10-year yield has climbed from 3.599% to 4.631%, reflecting inflation concerns and strong economic performance​. The dollar has followed a similar path, with the U.S. Dollar Index reaching 108.541. A firm dollar reduces gold’s appeal by increasing its cost in other currencies​​.

Should the NFP report point to a softening labor market, yields may decline, easing some of the pressure on gold. Conversely, stronger job growth could drive yields higher, reinforcing the current bearish sentiment on gold. This relationship between the labor market, yields, and the dollar will be critical in shaping gold’s performance over the next few weeks.

Political and Geopolitical Factors Remain in Play

Investors are also paying close attention to political developments. President-elect Donald Trump’s proposed tariffs and economic policies are widely expected to contribute to inflationary pressures, which may support gold as an inflation hedge. Geopolitical tensions in Eastern Europe and the Middle East continue to add to gold’s appeal as a safe-haven asset​​.

Weekly Outlook: Gold Poised for Volatility

Gold’s performance in the coming week will depend heavily on economic data and bond market trends. If the NFP report surprises to the downside, gold could move higher as yields soften. Conversely, strong labor data may drive yields up and keep gold under pressure. While the broader picture for gold remains positive, short-term price action will hinge on the direction of yields and the dollar.

Traders should remain attentive to Treasury market movements and Fed policy updates, as these will be key drivers of gold prices leading into the Fed’s next meeting.

Technically, the main trend is up, but the minor trend is down, which means that momentum is pointing lower. Recent gains have been capped by a pair of 50% levels at $2639.73 and $2663.51, while the market has been lifted by a support zone at $2571.68 – $2533.76.

Overcoming $2663.51 could give the market a strong upside bias, while a sustained move under $2533.76 suggests lower prices ahead.

More Information in our Economic Calendar.