Gold (XAU/USD) is currently trading sideways as traders await the release of the US Nonfarm Payrolls (NFP) report for September. The NFP report, published by the US Bureau of Labor Statistics (BLS), is expected to provide significant insights into the US labor market, which has become a key concern for the US Federal Reserve (Fed). A weak NFP report could reignite speculation of the Fed enacting a 50 bps rate cut in November, driving Gold higher as lower interest rates increase its attractiveness as a non-interest-paying asset.
Conversely, a healthy labor market revealed in the NFP report could reduce the chances of a 50 bps rate cut by the Fed, potentially capping Gold’s upside. The recent release of the US ISM Services PMI showed higher-than-expected expansion of activity in September, which has led to a decline in the market-based probabilities of a 50 bps rate cut. This, along with a steady decline in inflation and some cooling in the labor market, makes a lesser 25 bps rate cut almost certain and limits any downside for Gold.
Consensus expectations for the NFP headline figure vary widely, from Citibank’s estimate of 70K to 220K at the upper end. This suggests that the market will remain on edge until the release of the NFP report, with potential for volatility based on the actual figure. Gold also sees support from safe-haven flows due to concerns about an escalation of conflict in the Middle East, as well as the trend lower in global interest rates, which maintains Gold’s attractiveness as a portfolio asset for investors.
From a technical analysis perspective, Gold is currently extending its sideways mode, with support at $2,638 and resistance at $2,673. A breakout above $2,673 could signal a resumption of the uptrend, while a break below $2,638 could lead to further downside towards $2,600. In the medium and long-term, Gold remains in an uptrend, with potential for a resumption higher once the consolidation phase ends. The NFP report will likely be a key driver for Gold’s next move as traders scrutinize the data for clues on the trajectory of Fed policy.
In conclusion, Gold’s price action is currently in a holding pattern as traders await the release of the US Nonfarm Payrolls report. The outcome of the report could provide fresh insights into the state of the US labor market and influence the Fed’s decision on interest rates. A weaker-than-expected NFP report could increase the likelihood of a 50 bps rate cut by the Fed, driving Gold higher. Conversely, a strong NFP report could reduce the chances of a rate cut, potentially capping Gold’s upside. Technical analysis suggests that Gold is currently in a sideways mode, with support and resistance levels to watch for potential breakouts. Overall, the NFP report will likely be a key catalyst for Gold’s next move as traders assess the implications for Fed policy and market sentiment.
