Gold Price Forecast: XAU/USD flattens near $2,650 as US NFP takes centre stage
- Gold price trades sideways near $2,650 as investors await the US NFP data for fresh interest rate guidance.
- The Fed is expected to cut interest rates by 25 bps in its policy meeting on December 18.
- Gold price wobbles near $2,650 from almost a week.
Gold price (XAU/USD) trades in a tight range around $2,650.00 in Thursday’s European session. The precious metal struggles for a direction as investors have sidelined ahead of the United States (US) Nonfarm Payrolls (NFP) data for November, which will be released on Friday.
The labor market data will significantly influence market expectations for the likely interest rate decision by the Federal Reserve (Fed) in its monetary policy meeting on December 18. Currently, financial market participants expect the Fed to cut interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.
Economists expect the US economy to have added 200K fresh workers, significantly higher than 12K in October. The NFP report stated that payroll employment estimates in some industries were affected by the hurricanes last month. The Unemployment Rate is estimated to have increased to 4.2% from the former release of 4.1%. Investors will also pay close attention to the US Average Hourly Earnings data to get cues about the current status of wage growth.
The downside in the Gold price is expected to remain well-supported amid tensions between Russia and Ukraine. Historically, the appeal of the Gold price has strengthened amid heightening geopolitical tensions.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks down to near 106.20. 10-year US Treasury yields advance to near 4.21%.
Gold technical analysis
Gold price trades back and forth near the upward-sloping trendline around $2,650, which is plotted from the February low of $1,984.00 on a daily timeframe. The precious metal wobbles near the 20-day Exponential Moving Average (EMA) around $2,650.00.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.
Looking down, the November low of $2,536.87 will be the key support for Gold price bulls. On the upside, the October high of $2,790 will act as key resistance.
Gold daily chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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