The gold price (XAU/USD) has shown resilience as it remains close to the daily top, trading around the $2,640 area in anticipation of the US Nonfarm Payrolls (NFP) report. After hitting a one-and-a-half-week low earlier on Friday, it has managed a decent recovery. A combination of factors is at play in determining the metal’s current stance.
A softer risk sentiment in the market, geopolitical uncertainties, and fears of a trade war have all contributed to the appeal of gold as a safe-haven asset. However, expectations of a less dovish Federal Reserve (Fed), fueled by hopes that policies of US President-elect Donald Trump will stoke inflation, are capping significant upward movements. The US Treasury bond yields have remained subdued, with traders betting on a rate cut by the Fed in December. This has kept the US Dollar (USD) near a multi-week low, providing a favorable backdrop for the non-yielding gold.
Recent remarks from key Fed officials, including Fed Chair Jerome Powell on Wednesday, hinted at a possible pause in the rate-cutting cycle. This initially pulled gold to a one-week low on Friday, but various factors have since lent support and curbed further declines. The ongoing conflict between Russia and Ukraine, with Russia showing no signs of relenting, and concerns over Trump’s potential trade tariffs and their impact on the global economic outlook have dampened investors’ appetite for riskier assets and bolstered the safe-haven status of gold.
According to the CME Group’s FedWatch Tool, there is a 70% likelihood of a 25-basis-point rate cut by the Fed in December and a 30% chance of a pause. The rate cut bets remained relatively stable after the US Department of Labor reported an increase in Initial Jobless Claims. The benchmark 10-year US Treasury yield is hovering near its lowest since October 22, further weighing on the dollar and benefiting gold.
Traders are eagerly awaiting the US NFP report as it could offer insights into the Fed’s rate-cut path and shape the near-term trajectories of the USD and gold. From a technical perspective, the short-term setup is somewhat bearish-leaning. A breakdown below the 100-period Simple Moving Average on the 4-hour chart and a support area near $2,633 – $2,632 was seen as a potential bearish trigger, though the subsequent recovery calls for caution. On the upside, resistance lies near $2,649 and then the $2,655 supply zone. A move above last Friday’s swing high around $2,666 would shift the bias in favor of bulls and potentially see gold reclaim the $2,700 mark. On the downside, the Asian session low around $2,614 – $2,613 acts as immediate support, followed by the $2,605 – $2,600 area and then the 100-day SMA around $2,583. A breach below could see gold slide to the November monthly swing low near $2,537 – $2,536 and potentially even to the $2,500 psychological level.
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