- Gold price ticks higher for the third successive day on Friday, albeit lacks follow-through.
- Growing acceptance that interest rates in the US have peaked continues to act as a tailwind.
- A further recovery in the US bond yields revives the USD demand and caps any further gains.
- Traders also prefer to wait for the crucial US NFP report before placing fresh directional bets.
Gold price (XAU/USD) continues with its struggle to gain any meaningful traction on Friday and remains confined in a multi-day-old trading band heading into the European session. The precious metal, however, manages to hold in the positive territory for the third successive day amid growing acceptance that the Federal Reserve (Fed) is done with its policy-tightening campaign. That said, bulls opt to wait for the release of the closely-watched US Nonfarm Payrolls (NFP) for signs of a weaker labor market, which will boost chances of a rate cut by the Fed as early as March 2024 and lift the non-yielding yellow metal.
In the run-up to the key data risk, the ongoing recovery in the US Treasury bond yields assists the US Dollar (USD) in stalling the overnight pullback from a two-week high. This, in turn, is seen holding back traders from placing aggressive bullish bets around the USD-denominated Gold price. Apart from this, the underlying bullish tone around the equity markets is seen as another factor that contributes to capping the safe-haven XAU/USD. Any meaningful corrective decline, meanwhile, seems elusive in the wake of dovish Fed expectations, a darkening global economic outlook (particularly in China) and geopolitical tensions.
Daily Digest Market Movers: Gold price consolidates in a familiar range as traders await US NFP
- The market conviction that the Federal Reserve is done with its policy-tightening campaign and may start cutting rates in 2024 continues to act as a tailwind for the Gold price.
- The US JOLTS Job Openings data and the ADP report released earlier this week pointed to a cooling in the US labor market and reaffirmed dovish Fed expectations.
- According to the CME group’s FedWatch Tool, traders are currently pricing in over a 60% chance of a 25 bps Fed rate cut move as early as the March 2024 policy meeting.
- The yield on the benchmark 10-year US government bond moves away from a three-month low and lends some support to the US Dollar, capping gains for the non-yielding metal.
- The lack of any further escalation in the Middle East tensions and the overnight risk-on rally in the US equity markets also contributes to keeping a lid on the safe-haven XAU/USD.
- Traders now look to the closely-watched US monthly employment details for more cues about labor market conditions and the timing when the Fed could begin loosening policy.
- The headline NFP print is expected to show that the US economy added 180K jobs in November, up from 150K in the previous month, and the unemployment rate held steady at 3.9%.
- The focus will also be on Average Hourly Earnings data, which is expected to have risen by 0.3% during the reported month and by 4% over the past 12 months through November.
- Any negative surprise could force the Fed to soften its hawkish tone in the coming months and benefit the commodity amid worries about a global economic downturn and geopolitical tensions.
Technical Analysis: Gold price extends its consolidative price move before the next leg up
From a technical perspective, the recent range-bound price action witnessed over the past four days constitutes the formation of a rectangle on short-term charts. This points to a consolidation phase before the next leg of a directional move. Meanwhile, the lower boundary of the said trading band now coincides with the 100-period Simple Moving Average (SMA), currently pegged around the $2,015-2,014 area. This, in turn, should act as a key pivotal point ahead of the $2,000 psychological mark. A convincing break below the latter could drag the Gold price to the $1,977-1,976 horizontal support. The corrective decline could get extended further towards the very important 200-day SMA, near the $1,950 area.
On the flip side, the $2,038-2,040 region, representing the top end of the multi-day-old trading range, might continue to act as an immediate barrier. A sustained strength beyond will be seen as a fresh trigger for bullish traders amid the occurrence of a golden cross, with the 50-day Simple Moving Average rising above the 200-day SMA. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the upside. In the meantime, any subsequent move up might confront some resistance near the $2,045 level ahead of the $2,071-2,072 area and the $2,100 round figure.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | -0.04% | -0.18% | -0.25% | -0.43% | -0.03% | -0.06% | |
| EUR | 0.02% | -0.02% | -0.16% | -0.24% | -0.42% | -0.02% | -0.03% | |
| GBP | 0.04% | 0.02% | -0.15% | -0.22% | -0.40% | -0.01% | 0.00% | |
| CAD | 0.18% | 0.16% | 0.15% | -0.07% | -0.25% | 0.15% | 0.13% | |
| AUD | 0.25% | 0.24% | 0.22% | 0.07% | -0.18% | 0.22% | 0.20% | |
| JPY | 0.38% | 0.42% | 0.40% | 0.24% | 0.18% | 0.37% | 0.38% | |
| NZD | 0.04% | 0.02% | 0.00% | -0.15% | -0.22% | -0.40% | -0.01% | |
| CHF | 0.06% | 0.03% | 0.01% | -0.14% | -0.21% | -0.38% | 0.00% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Source: https://www.fxstreet.com/news/gold-price-struggles-for-a-firm-near-term-direction-eyes-us-nfp-report-for-fresh-impetus-202312080410