Gold Prices Forecast: XAU/USD Rises as NFP Report Looms Amid Soft U.S. Data

Highlights

• Diminishing U.S. Treasury yields accentuate gold’s allure as Fed rate changes remain uncertain.
• A disappointing NFP report could enhance gold’s appeal, while a robust one might cool it.
• Spot gold (XAU/USD) nears $1,942.22/oz, forecasting a 1% weekly gain amidst rate hike uncertainties.

Gold Market Watches Fed’s Next Move

Spot gold (XAU/USD) hovered at $1,942.22 per ounce by early Friday morning GMT, setting itself up for over a 1% weekly gain. U.S. gold futures were also bullish, trading near $1,970. The commodity’s strong showing comes on the back of weakened prospects for U.S. interest rate hikes this year, particularly as market participants await the U.S. non-farm payrolls (NFP) report due later in the day.

U.S. Economic Indicators Point to Slowing Activity

The general mood among investors appears cautious but optimistic, as economic indicators from the U.S. this week have largely been softer than expected. Job openings in July hit their lowest level in 2.5 years, and second-quarter economic growth was slightly less robust than previously projected. These metrics have led to a softening of the U.S. dollar and Treasury yields, both contributing factors to gold’s rising attractiveness.

Treasury Yields and The Dollar Index

The decline in U.S. Treasury yields has played a pivotal role in gold’s recent upward trajectory. Treasury yields are set to conclude the week approximately 3% lower, largely owing to subdued inflation data. The declining yields have boosted the allure of gold, a non-interest-bearing asset, especially as the Federal Reserve seems unlikely to adjust interest rates in the near term.

NFP Report Could Be a Game Changer

The upcoming NFP report could further solidify gold’s bullish run. If the report prints a lower-than-expected number of new jobs, it’s likely to push Treasury yields even lower, thereby adding another layer of shine to gold. On the flip side, a stronger report could put a damper on the current rally.

Short-Term Forecast: Bullish

Given the week’s economic data and the diminishing likelihood of an imminent rate hike by the Fed, the short-term outlook for gold prices remains bullish. Of course, this could change with the release of the NFP report, but as it stands, gold is on track for its second consecutive week of gains.

Technical Analysis

The current 4-hour price of XAU/USD at 1943.25 shows a minor increase from the previous 4-hour price of 1940.07. It’s trading above both the 200-4H and 50-4H moving averages, at 1933.60 and 1922.43 respectively, signaling bullish momentum. The 14-4H RSI stands at 64.15, indicating a strong momentum but not yet in overbought territory.

The price is approaching the main resistance area between 1946.99 to 1954.88, having sustained a strong rally after establishing support at 1893.07 to 1885.79. Based on these indicators, the current market sentiment for XAU/USD on the 4-hour chart is bullish.