Gold Price Forecast: XAU/USD risks a correction, with eyes on US Nonfarm Payrolls data

• Gold price eases off all-time highs of $2,165 early Friday.
• Dollar and Treasury yields mire in lows, as US Nonfarm Payrolls data is in the spotlight.  
• Overbought RSI conditions on the daily chart continue to warrant caution for Gold buyers.

Gold price is on a steady corrective decline from an all-time high of $2,165 set on Thursday, as the US Dollar licks and Treasury bond yields lick their wounds heading into the critical US Nonfarm Payrolls (NFP) data release later on Friday.

Gold price trades with caution

Gold buyers are trading with caution early Friday, as a correction could be in the offing after the recent upsurge and on another upside in the US NFP headline figure. The US economy is likely to have added 200K jobs last month, as against a surprise gain of 353K in January. Average Hourly Earnings are set to rise at an annual pace of 4.4% in the reported period, down from the 4.5% registered previously.

Disappointing US labor market report is likely to exacerbate the pain in the US Dollar while lifting Gold price to a fresh lifetime high, as it could affirm the increasing expectations of a US Federal Reserve (Fed) interest rates cut in June.  

On Thursday, Fed Chair Jerome Powell echoed the comments delivered during his testimony before the House Financial Services Committee on Wednesday, stating that rate cuts "can and will begin" this year. Powell added that the Fed policymakers are still not convinced that continued progress toward their 2% inflation objective is “assured,” and that it won’t make sense to cut interest rates until they are confident.

The day of Powell’s testimony accentuated the decline in the US Dollar, as it hit the lowest level in two months against its major counterparts.

All eyes now remain on the all-important US NFP data for fresh hints on the timing and the scope of the Fed rate cut, especially after the downbeat employment data released earlier this week and Fed Chair Powell’s dovish tone.

The US private sector added 140,000 jobs in February, an increase from the upwardly revised 111,000 in January but a bit below the expected 150,000 additions, ADP reported on Wednesday. The number of job openings on the last business day of January stood at 8.86 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Wednesday, coming in slightly below the market forecast of 8.9 million.

Gold traders also remain wary of the end-of-the-week flows and profit-taking the bright metal, as they gear up for next week’s Consumer Price Index (CPI) inflation data from the United States.

Gold price technical analysis: Daily chart

The near-term technical outlook for Gold price remains more or less the same, with a correction expected anytime soon, the 14-day Relative Strength Index (RSI) continues to remain in a highly overbought zone.

If Gold sellers jump in, Gold price could test the initial support at $2,144, the previous day’s low.

The next cushion is seen at $2,121, the intersection of Wednesday’s low and the 23.6% Fibonacci Retracement (Fibo) level of the recent rally from the February 14 low of $1,984 to the all-time high of $2,165.

A sustained break below that level could help Gold sellers flex their muscles toward the $2,100 threshold.  

However, any retracement in Gold price could be seen as a good dip-buying opportunity, as the 21-day Simple Moving Average (SMA) and the 50-day SMA Bull Cross remains in play.

On the flip side, Gold buyers need to capture the $2,200 threshold for them to sustain the uptrend. Ahead of that, the record high at $2,165 and the $2,180 resistance will come into play.

(The first bullet point in this story was corrected on Friday at 06:37 GMT to say that "Gold price eases off all-time highs of $2,165 early Friday," not early Thursday.)