- Gold prices remain confined to a narrow trading range amid mixed fundamental indicators.
- Geopolitical risks are supporting the metal, although recent strength in the US dollar has capped gains.
- Traders also appear to be passive, keeping an eye on the US NFP report before betting on the direction.
Gold price (XAU/USD) is moving sideways within the familiar range it has held since the beginning of this week as traders wait for a new trigger before taking positions for the next directional move. is being extended. All eyes therefore remain on the release of the closely watched US monthly employment report, scheduled for later in the North American session this Friday. The well-known Nonfarm Payroll (NFP) report could influence expectations about the pace of the Federal Reserve's interest rate cutting cycle. This will play a significant role in driving demand for the US dollar (USD) in the near term and provide some meaningful stimulus to the non-yielding yellow metal.
The US dollar (USD) hit a one-month high on Thursday as the Fed faces key data risks and the likelihood of more aggressive policy easing by the Fed and a deep rate cut at its next policy meeting in November declines. It is trending steadily in the vicinity. This is seen as a key factor acting as a headwind for gold prices. Still, the further escalation of geopolitical tensions in the Middle East and the growing risk of broader conflict is a tailwind for safe-haven precious metals. Despite this, XAU/USD is still within range of its all-time high set last week.
Daily Digest Market movers: Gold price traders remain on the sidelines ahead of important monthly US jobs report
- The U.S. Department of Labor (DOL) reported Thursday that the number of Americans filing for unemployment benefits rose slightly to 225,000 in the week ending Sept. 28, up from 218,000 the previous year.
- This comes on top of a stronger-than-expected increase in U.S. private sector employment in September and an unexpected increase in job openings in August, evidence that the labor market is stable and remains resilient. It becomes.
- Separately, the Institute for Supply Management (ISM) said the economy remained on solid footing in the third quarter as the non-manufacturing PMI rose to 54.9 in September, the highest level since February 2023. He announced that he had suggested that he was doing so.
- This further dampened market expectations for another big rate cut by the Federal Reserve, pushing the US dollar to a one-month high and, in turn, seeing this as a key headwind for low-yielding gold prices. are.
- Hezbollah launched about 230 projectiles into Israeli territory from Lebanon on Thursday, and Israel launched an attack early Friday targeting Hezbollah's intelligence headquarters on the southern outskirts of the Lebanese capital, Beirut.
- Meanwhile, Israel was told on Tuesday night that it would carry out very large-scale retaliation within days for an onslaught of about 200 ballistic missiles by Iran, raising the risk of a full-scale war and /It will give support to USD.
- Traders are now looking forward to the US Nonfarm Payrolls (NFP) report. The report is expected to show the economy added 140,000 jobs in September, slightly less than the previous estimate of 142,000, and the unemployment rate to remain stable at 4.2%.
- This and average hourly wages will be closely watched for clues as to the size of November's Fed rate cut, which will play a key role in driving demand for the US dollar and giving commodities the impetus in a new direction. It will be fulfilled.
Technical Outlook: Gold price bulls dominate while above $2,625-$2,624 throwback support
From a technical perspective, the price action within the range could still be classified as a bullish consolidation phase on the back of the recent strong rally towards a record peak. Additionally, the oscillator on the daily chart remains comfortably in positive territory, easing out of the overbought zone. This, in turn, favors bullish traders and suggests that the path of least resistance for gold prices remains to the upside. Meanwhile, the $2,672-$2,673 area could provide some immediate resistance ahead of the $2,685-$2,686 zone, or last week's all-time high. This is closely followed by the $2,700 mark, and a break above this mark would set the stage for an extension of the established multi-month uptrend.
On the contrary, the weekly low around $2,625-$2,624, which coincides with the resistance breakpoint of the short-term ascending channel, may continue to provide support and serve as a key key point. A convincing breakout could prompt aggressive technical selling and push gold prices below $2,600 and towards the next associated support near the $2,560 zone. The correctional decline could extend further towards the $2,535-$2,530 support before XAU/USD finally falls to the psychological mark of $2,500.
Gold FAQ
Gold has played an important role in human history as it has been widely used as a store of value and a medium of exchange. Today, apart from their brilliance and use as jewellery, precious metals are widely seen as safe assets, meaning they are considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation, as it is not dependent on any particular issuer or government.
Central banks are the largest holders of gold. With the aim of supporting their currencies in times of turmoil, central banks tend to purchase gold to diversify foreign exchange reserves and improve perceptions of economic and currency strength. High gold reserves can be a source of confidence in a country's solvency. Central banks added 1,136 tonnes of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase amount since records began. Central banks in emerging countries such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has an inverse relationship with the US dollar and US Treasuries, which are major reserve and safe haven assets. Gold tends to rise when the dollar falls, allowing investors and central banks to diversify their assets during times of turmoil. Gold is also inversely correlated with risk assets. Rising stock markets tend to push gold prices down, while declines in riskier markets tend to favor the precious metal.
Prices may vary depending on various factors. Geopolitical instability and fears of a deep recession can cause the price of gold to quickly rise from its safe-haven status. Gold, a non-yielding asset, tends to rise when interest rates fall, but rising costs usually put pressure on the yellow metal. Still, most moves will depend on how the US dollar (USD) behaves, as the asset is priced in dollars (XAU/USD). A strong dollar tends to suppress gold prices, while a weak dollar can push gold prices up.
