Gold Prices Forecast: XAU/USD Facing Weekly Loss as NFP Report Looms

Key Points

• Gold faces first weekly drop in a month.
• Dollar rise, high Treasury yields pressure gold prices.
• Non-farm payrolls report crucial for gold’s direction.

Gold Futures: Navigating Economic Headwinds

Gold (XAU/USD) is poised for their first weekly decline in a month, grappling with a stronger dollar and higher bond yields as traders await crucial U.S. labor data.

Market Fluctuations

Spot gold marginally rose by 0.1% to $2,044.57 early Friday, but faces a weekly drop of about 0.9%. U.S. gold futures similarly edged up to $2,051.40. This downturn is attributed to a rebound in the dollar and yields, with market sentiment shifting away from an imminent Fed rate cut.

Economic Data and Fed Policy

The dollar index’s climb signals its best week since July, making gold costlier for holders of other currencies. Benchmark U.S. 10-year Treasury yields remain above 4%, their highest since October. Minutes from the Fed’s December meeting suggest a cautious approach towards rate cuts amid mixed inflation views.

Employment Data’s Impact

The spotlight is on the U.S. non-farm payrolls report, expected to show a gain of 170,000 jobs, according to Dow Jones. This follows data indicating stronger-than-anticipated employment growth, reinforcing the labor market’s resilience. The outcome of this report is pivotal for shaping future Fed actions.

Short-Term Forecast

Given the strength of the dollar and robust labor market data, gold’s short-term outlook appears bearish. The anticipated solid job growth and lower chances of near-term rate cuts diminish gold’s appeal as an inflation hedge, pointing towards potential price pressure in the near future.

Strong-than-expected NFP data could be bearish for gold because it could encourage the Fed to push its first rate cut into May. Weaker-than-forecast numbers should encourage traders to increase bets on a March rate hike. This could weaken yields and the U.S. Dollar, giving gold prices a boost.

Technical Analysis

Gold (XAU/USD), currently at 2044.03, is trading above both its 50-day and 200-day moving averages, at 2010.75 and 1962.00 respectively, signaling a bullish orientation.

The close proximity to the 50-day moving average and minor support at 2009.00 forms a critical support cluster. This zone may serve as a pivot for gold’s price movements. A decisive break below this cluster could potentially trigger an acceleration to the downside, shifting the market’s short-term sentiment.

The current stance above these key moving averages, coupled with the nearness to the support cluster, underscores a cautious but predominantly bullish market outlook.