Gold Prices Forecast: Labor Data Set to Influence Spot Gold Trend

Highlights

• XAU/USD sees gradual rise with weakening dollar, Fed policy end near.
• Tuesday’s gold price drop follows record high on Monday.
• U.S. job openings fall, spotlight on Friday’s payroll data.
• Traders eye Fed’s Dec. meeting for rate cut hints, influencing gold.

Gold Prices and the Dollar

Gold prices (XAU/USD) are witnessing a gradual rise on Wednesday, driven by a weakening dollar and the anticipation that the Federal Reserve may be nearing the end of its policy tightening cycle. This increase follows a decline on Tuesday, which came after gold’s ascent to a record high on Monday. However, the price had subsequently fallen over 2% since that record peak as the dollar gained strength.

Labor Market Data and Gold’s Trajectory

Recent U.S. job data, showing job openings falling to a two-and-a-half year low, signals a cooling labor market. This has heightened focus on Friday’s non-farm payrolls for November, which may further clarify the Fed’s interest rate path. The market anticipates a potential rate cut by March, with CME’s FedWatch Tool indicating a 60% probability.

Interest Rates and Gold’s Short-term Outlook

Traders are closely watching the Fed’s next moves, particularly the policy meeting on December 12-13. Despite expectations of the Fed maintaining current rates, there’s a significant anticipation of a rate cut by March. This scenario is supportive of non-interest-bearing gold, but analysts suggest a lasting rise in gold prices to $2,100 per troy ounce may only occur in the second half of 2024, when the Fed begins reducing interest rates.

Fed’s Blackout Period and Market Anticipation

The Fed’s blackout period limits fresh insights from policymakers, shifting market focus to upcoming economic data releases, including the ADP’s private payrolls and nonfarm payrolls. These reports are crucial for understanding the economy’s strength and the impact of higher interest rates.

Gold Market Sentiment

The market sentiment for gold remains cautiously optimistic, with geopolitical risks and economic data points playing a pivotal role. The Fed’s stance on interest rates and upcoming labor market data will be key determinants of gold’s short-term price movements.

Technical Analysis

The current price of gold (XAU/USD) at 2027.76 is situated above both the 200-day and 50-day moving averages, set at 1949.02 and 1954.15 respectively, indicating a bullish trend in the longer-term perspective. This positioning above key moving averages suggests sustained buying interest.

Moreover, the price is above the main support level of 1987.00 and close to the minor resistance at 2067.00. The proximity to minor resistance could imply potential for another breakout or consolidation.

The overall market sentiment for gold, considering its position relative to these technical indicators, leans bullish, with an eye on the resistance levels for further upward movement indications.