Gold prices rose on Friday ahead of critical US labor data. Still, the metal is on course for its third weekly loss, speculating that the Federal Reserve will maintain its aggressive rate hike policy. As of 0055 GMT, spot gold was up 0.2% at $1,699.40 an ounce, although it was down 2% for the week. U.S. gold futures rose 0.1% to $1,710.50.
The dollar index was slightly below a 20-year high hit the previous day, but remained on track for a third weekly gain. The gold market is trying to rebound from its six-week low of $1,689 as investors reposition themselves ahead of the critical US nonfarm payrolls report.
GOLD traders should avoid making directional bets as US payrolls data will almost certainly influence the price of the Fed’s rate hike for this month. Markets are betting on a 75 basis point rate hike in September ahead of US jobs data. However, as the Fed’s aggressive rate hikes raise expectations, the dollar continues in a win-win situation. China’s new COVID lockdown in Chengdu, led by risk aversion, will continue to benefit Dollar bulls.
As a result, the precious metal XAU/USD is vulnerable to further depreciation if the recovery effort fails. However, US Treasury rates are reaching multi-year highs, limiting bullion returns. According to Stephen Innes, managing partner of SPI Asset Management, weaker than expected data could provide a reprieve for gold selling. “The market is still betting on a story of higher US interest rates for longer.” The US non-farm payrolls report is due at 12:30 GMT and is expected to show 300,000 jobs were added in August.
According to data released Thursday, the number of Americans submitting new claims for unemployment benefits plunged to a two-month low last week. At the same time, layoffs declined in August, implying that the Fed will need to continue to aggressively raise rates. While factory activity in the United States increased gradually last month, it fell in China, the euro zone and the United Kingdom.
Major central banks are expected to maintain aggressive monetary policy tightening to rein in soaring inflation, but this is also fueling concerns about an economic slowdown. Even though gold is considered a hedge against inflation and economic uncertainty, higher interest rates increase the opportunity cost of owning the metal.
Gold Technical Outlook
The drop in gold price halted at 1690.00, allowing positive trades to be generated by stochastic positivity, leading us to recognize that we will see a new bullish bias today, with a primary focus of 1726.60.
Accordingly, we expect the positive bias to continue in the coming sessions, bearing in mind that failure to break above 1702.00 would halt the indicated upside and push the price to re-initiate the main downtrend.
Today’s trading range is likely between 1685.00 support and 1725.00 resistance.
Projected Trend Today: Bullish