Gold Price Forecast: XAU/USD licks its wounds below $1,800 ahead of US NFP showdown

• Gold is off the lows but not out of the woods yet amid hawkish Fed expectations.
• The risk sentiment improves, downs the US dollar while yields ease as well.
• All eyes on the US NFP report, as gold’s daily technical setup leans bearish.

 

Gold price is making a minor recovery attempt from eleven-day lows of $1,786 reached on Thursday, as bears take a breather ahead of the all-important US Nonfarm Payrolls release. A solid NFP publication is likely to back the speculation around aggressive Fed rate hikes, boosting the Treasury yields and the US dollar once again at gold’s expense. Meanwhile, gold price could benefit from profit-taking in the dollar ahead of the key event risks. The improving market mod weighs down on the safe-haven greenback, aiding the recovery in the bright metal, for now.

Technically, gold price remains vulnerable as it has taken out all the major Daily Moving Averages (DMA), with the downside exposed towards $1,775 should the December 21 low of $1,785 give way.

Read: USD: Why a strong Nonfarm Payrolls may not be enough?

Gold (XAU/USD) licks its wound around $1,790 while bracing for the first weekly fall in four during early Friday’s Asian session. The yellow metal seesaws near a 12-day low amid the market’s cautious mood ahead of the US jobs report for December. Even so, bears remain hopeful on the recent hawkish signs from the US Federal Reserve (Fed).

The yellow metal slumped to the multi-day low the previous day after the latest Fedspeak backed a rush to rate lifts, after the Federal Open Market Committee (FOMC) Meeting Minutes conveyed hawkish bias of the policymakers, suggesting a faster rate-hike and plans to discuss balance-sheet normalization. That said, St. Louis Fed President James Bullard pushed for a March rate hike whereas Federal Reserve Bank of San Francisco President and an FOMC member Mary C. Daly marked the need to raise interest rates to keep the economy in balance.

Following the increased pressure towards tighter monetary policy and balance-sheet alteration, the US Treasury yields refreshed multi-day high. That said, the US 10-year Treasury yields refreshed a nine-month high to poke 1.75% before closing with 2.5 basis points (bps) of a daily gain near 1.728%. The same weighed on the Wall Street benchmarks even as downbeat data pushed bears to satisfy with smaller losses.

Other than the hawkish Fedspeak, fears of the South African covid variant, namely Omicron, also underpin the US Treasury yields and weigh on gold prices. Although figures in the UK have eased from record tops, the record-high numbers elsewhere push policymakers to announce multiple local activity restrictions, recently in Australia. It’s worth noting that the finding of a new virus variant in France, which spreads faster than Omicron, also challenges the market sentiment and weighs on gold prices.

Talking about the data, US Factory Orders, Weekly Jobless Claims, ISM Services PMI and Good Trade Balance all came in downbeat but couldn’t stop the US dollar bulls amid strong favor for the faster Fed rate hike, which in turn propelled the yields.

Looking forward, market fears of Omicron can entertain the gold sellers but major attention will be given to the December month jobs report from the US. Forecasts suggest the headlines Nonfarm Payroll (NFP) to rise from 210K to 400K while the Unemployment Rate may have eased to 4.1% from 4.2% prior. The underemployment rate, however, is likely rising from 7.8% to 8%. Given the upbeat expectations from the US employment data, Fed’s hawkish rhetoric is likely to be justified, which in turn could propel yields and the US dollar and may weigh on the gold prices.

Technical analysis

Although a clear break of the 200-DMA joins downbeat MACD signals and RSI retreat to keep gold sellers hopeful, an upward sloping trend line from August, close to $1,780, challenges the metals further downside.

Should gold bears conquer the $1,780 support, odds of a south-run towards a two-month-long horizontal area surrounding $1,760 can’t be ruled out. However, any further weakness will make gold prices vulnerable to slump towards September’s low surrounding $1,721.

Meanwhile, corrective pullback needs to stay beyond the 200-DMA level of $1,800 for a while before directing gold buyers towards October’s peak of $1,814 and the latest swing high close to $1,831.

It’s worth mentioning that tops marked in July and September offer a crucial resistance around $1,834, followed by the $1,850 threshold, to test the gold bulls during the bumpy road to November’s peak of $1,877.

Overall, gold prices have signaled bearish bias but the key support line challenges sellers ahead of the all-important US jobs report for December.

Gold: Daily chart

Trend: Further weakness expected