XAU/USD approaches $1,807 hurdle ahead of United States Nonfarm Payrolls

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  • Gold price grind near the key hurdle after refreshing four-month high.
  • Hopes of slower Federal Reserve rate hikes drowned the United States Treasury bond yields, US Dollar and favored XAU/USD.
  • Optimism surrounding China also allowed Gold buyers to keep the reins.
  • United States Nonfarm Payrolls will be crucial amid talks of Fed’s 50 bps rate hike in December.

Gold price (XAU/USD) refreshed a four-month high above $1,800 before taking rounds to $1,805-07 during early Friday morning in Asia. In doing so, the yellow metal portrays the market’s cautious mood ahead of the key catalysts. Also likely to have probed the Gold buyers could be the recently mixed updates from the Fed, as well as the data from the United States.

Dovish Federal Reserve drowns the United States Treasury bond yields, US Dollar and Gold Price

The dovish bias of the Federal Reserve (Fed) Chairman Jerome Powell, as well as downbeat comments from US Treasury Secretary Janet Yellen, initially raised hopes of easy rate hikes.

Recently, Federal Reserve (Fed) Governor Michelle Bowman stated that (It is) appropriate for us to slow the pace of increases. Before him, Fed Governor Jerome Powell also teased the slowing of a rate hike while US Treasury Secretary Yellen also advocated for a soft landing. Further, Vice Chair of supervision, Michael Barr, also said, “We may shift to a slower pace of rate increases at the next meeting.”  It’s worth noting that the recent comments from New York Fed’s John Williams seemed to have tested the US Dollar bears as the policymakers stated that the Fed has a ways to go with rate rises.

The comments favoring a 50 bps Fed rate hike in December allowed the US Treasury bond yields to refresh a four-month low amid receding market pessimism and a rush toward the riskier assets.

It’s worth noting, however, that the Bank of Japan’s (BOJ) hints of adjusting the easy money policies seemed to have challenged the bond yields of late amid fears of less demand from the biggest customer in Asia.

That said, the benchmark US 10-year Treasury bond yields slumped to 3.50% while the two-year counterpart printed 4.23% while poking the lowest levels since October by the press time.

With this, US Dollar Index (DXY) slumped to the lowest levels in four months, pressured around 104.70 at the latest.

China’s Covid conditions, mostly downbeat United States data also weigh on XAU/USD

The consecutive three days of the downtrend of Chinese daily Covid infections from a record high allowed the policymakers to tease the “next stage” in battling the virus while announcing multiple easing of the activity-control measures.

Elsewhere, US Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, matched 5.0% market forecasts on YoY but eased to 0.2% MoM versus 0.3% expected. Further, US ISM Manufacturing PMI for November eased to 49.0 versus 49.7 expected and 50.2 prior.

US Nonfarm Payrolls are the key for Gold buyers

While the aforementioned catalysts are well in place to weigh on the Gold price, it’s the market’s anxiety ahead of the US employment report for November that probes XAU/USD bulls of late, especially when the Fed is dovish.

Forecasts suggest that the headlines Nonfarm Payrolls (NFP) is likely to ease with a 200K print versus 261K prior while the Unemployment Rate could remain unchanged at 3.7%. It should be noted that a likely easing in the Average Hourly Earnings for the stated month could also weigh on the Gold price.

Hence, a downbeat US jobs report may allow the XAU/USD buyers to keep the reins. However, the historical analysis suggests fading of NFP-led moves within four hours and hence any surprises might not harm the latest moves of the yellow metal.

Also read: US November Nonfarm Payrolls Preview: Analyzing gold’s reaction to NFP surprises

Gold price technical analysis

Gold buyers take a breather at the highest levels since early August amid the overbought conditions of the Relative Strength Index (RSI) line, placed at 14. Also challenging the metal buyers is the horizontal area surrounding $1,805-07 comprising multiple levels marked since mid-June.

That said, the Moving Average Convergence and Divergence (MACD) indicator’s bullish signals join the previous day’s upside break of the 200-Day Moving Average (DMA) and a downward-sloping trend line from August to keep the Gold price on the bull’s radar.

Hence, a clear upside break of the $1,807 appears necessary for the bullion to let the buyers sit in the driver’s seat. Following that, a run-up toward a mid-June high of $1,858 and then to June’s peak surrounding $1,880 can’t be ruled out.

Alternatively, pullback moves remain elusive unless the quote stays beyond the 200-DMA level near $1,796, a break of which could quickly drag the Gold price towards the resistance-turned-support line from early August, close to $1,782 at the latest.

In a case where the XAU/USD remains weak past $1,782, a one-month-old ascending support line near $1,758 will be crucial for the Gold traders to watch as it holds the key to the bear’s entry.

Gold price: Daily chart

Trend: Further upside expected