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Gold consolidates below $4,100 as USD stands firm ahead of US NFP | FXStreet

Gold (XAU/USD) seesaws between tepid gains/minor losses during the Asian session on Thursday as traders opt to wait for the delayed US Nonfarm Payrolls (NFP) report before placing fresh directional bets. In the meantime, reduced bets for another rate cut by the US Federal Reserve (Fed) lifted the US Dollar (USD) to its highest level since late May and acts as a headwind for the non-yielding yellow metal.

Apart from this, a generally positive tone around the equity markets is seen as another factor undermining demand for the safe-haven Gold. This helps offset concerns about the weakening economic momentum on the back of the longest-ever US government shutdown and warrants caution before positioning for an extension of this week’s bounce from levels below the $4,000 psychological mark.

Daily Digest Market Movers: Gold traders await the crucial US NFP report before placing directional bets

  • The minutes from the October 28-29 FOMC meeting, released on Wednesday, showed that many participants were in favor of lowering the target range for the federal funds rate, while several were against the decision. Policymakers cautioned that cutting interest rates further could risk entrenched inflation.
  • The hawkish outlook forced investors to further scale back their bets that the US central bank will lower borrowing costs again in December. This, in turn, lifts the US Dollar to its highest level since late May during the Asian session on Thursday and exerts some downward pressure on the non-yielding Gold.
  • Traders now look forward to the delayed release of the US Nonfarm Payrolls (NFP) report for September, due later today, amid signs of a softening labor market. The crucial data will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the commodity.
  • US President Donald Trump reportedly approved a 28-point plan for peace between Russia and Ukraine this week. Multiple news outlets suggested that the plan in question would require Ukraine to make territorial concessions and implement significant reductions in its military capabilities.
  • The US delegation made a rare wartime visit to Kyiv for talks with Ukraine’s leaders in an attempt to revive stalled peace talks with Russia. This is seen as another factor undermining the safe-haven precious metal and warrants some caution for bullish traders amid a fresh wave of the risk-on trade.

Gold once again fails to find acceptance above $4,100; 200-period EMA on H4 holds the key for bulls

From a technical perspective, any further decline is more likely to find decent support near the 200-period Exponential Moving Average (EMA), currently pegged near the $4,018 region. This is followed by the weekly swing low, levels just below the $4,000 psychological mark, below which the Gold price could accelerate the fall towards the $3,931 support. The downward trajectory could extend further towards retesting the late October swing low, around the $3,886 region.

On the flip side, the Asian session peak, around the $4,110 region, could act as an immediate resistance. Some follow-through buying beyond the overnight swing high, around he $4,120 area, will be seen as a fresh trigger for bullish traders and lift the Gold price to the next relevant hurdle near the $4,152-4,155 region. The subsequent move up should pave the way for a move towards reclaiming the $4,200 round-figure mark.

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.