Gold Price Forecast: XAU/USD defends $1,900 but for how long? US Nonfarm Payrolls holds the key

Gold price is licking its wounds while holding above the $1,900 threshold on the final trading day of the week. Traders eagerly await the all-important United States Nonfarm Payrolls data for placing fresh directional bets on Gold price.

US Nonfarm Payrolls holds the key for Gold price

The United States Dollar (USD) witnessed good two-way action following the top-tier US economic data released on Thursday but ended the day sharply lower, despite broad risk aversion and the ongoing upsurge in the US Treasury bond yields. Ahead of the US Open, the US Dollar Index jumped to reach weekly highs near 103.60, as traders cheered an unexpected jump in the US ADP Employment Change. The data came in at 497K in June vs. 228k expected and 267K previous reading. The US Treasury bond yields extended their rally after the ADP data ramped up expectations for a 25 basis points (bps) US Federal Reserve (Fed) rate hike this month while also strengthening the case for more Fed tightening later this year.

Gold price reversed its early bounce and dropped sharply to four-day lows of $1,903 amid resurgent US Dollar demand. However, the downside in the Gold price remained short-lived, as the US Dollar sellers returned on mixed US JOLTS job openings data and the ISM Services PMI. Job Openings fell to 9.82 million at the end of May, dropping from an upwardly revised 10.3 million in April, according to the BLS’ latest Job Openings and Labor Turnover Survey report. Markets had expected openings to fall to 9.935 million in May. The June US ISM Services purchasing managers' index (PMI) came in at 53.9, which was just above the 51.0 forecast. Despite the upbeat headline number, the ISM Services components were mixed, which failed to impress the US Dollar bulls. The sharp pullback in the US Dollar helped Gold price stage a modest comeback to recapture the $1,900 mark on a daily closing basis.

Friday’s Nonfarm Payrolls and wage inflation data hold the key for Gold price, as it remains on the back foot for the third day in a row. Economists are expecting the US economy to have added 225K jobs in June as against a growth of 339K reported in May, The Average Hourly Earnings are seen rising 4.2% in the reported period, at a slightly slower pace than May’s 4.3% increase. Below-estimates US jobs and wage inflation data are likely to pour cold water on bets for more Fed rate hikes after July, triggering a sharp sell-off in the US Dollar and the US Treasury bond yields across the curve. In such as scenario, Gold price could benefit and rebound toward the $1,950 barrier. Conversely, on stunning US labor market report, especially after the ADP blowout, Gold price could resume its downtrend toward $1,870, as a tighter US labor market will allow the Fed to stay on its rate hike path.  

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price continues its struggle with the critical falling trendline (wedge) resistance, now at $1915. Daily closing above the latter will validate a bullish wedge formation. It’s worth noting, Gold price has been trading within a falling wedge after topping out at record highs of $2080 in early April.  

Gold sellers, however, keep lurking at higher levels, as the last week’s Bear Cross remains in play. The 14-day Strength Index (RSI) stays below the midline, suggesting that any upside attempts in Gold price could likely remain temporary. 

On the upside, Gold bulls need a decisive break above the falling trendline resistance of $1,915 on a daily closing basis to initiate a recovery toward the $1,950 threshold, where the mildly bullish 50-Daily Moving Average (DMA) aligns. However, the 21 DMA barrier at $1,930 will remain a tough nut to crack for Gold optimists.

On the downside, immediate support awaits at the previous day’s low of $1,903, below which the $1,900 key level will be challenged. The next cushion is envisioned at the three-month low of $1,893. Gold sellers will aim for the $1,870 static support if all the above caps give way.