Gold Price Forecast: US Jobs Report in Focus as Traders Digest FOMC

Gold prices are moderating after falling nearly 1% on Wednesday in response to the FOMC decision. The US central bank hiked its benchmark rate by 75 basis points in a widely expected move. Fed Chair Jerome Powell pushed back on the narrative that the Fed would pause rate hikes, stating: “It’s very premature, in my view, to think about or to be talking about pausing our rate hikes.” Mr. Powell went on to say that rates will most likely have to go higher than previously forecasted. Fed funds futures moved to price a 5% terminal rate at the May 2023 meeting.

Gold prices fell on those comments. Treasury yields and the US Dollar rose, reducing the yellow metal’s investment appeal. The US Dollar DXY Index and mid- to long-term Treasury rates remain below their recent highs despite a modest increase in Fed rate hike bets. Assuming the US Dollar and rates across much of the curve remain off their highs, bullion prices should hold above recent lows around 1,615 to 1,617.

Still, downside risks remain, and because the Fed’s outlook relies on economic data, gold prices are largely driven by how the market thinks the Fed will interpret and act on that data. A resilient US labor market has complicated central bank efforts to lower inflation. While interest rates take longer to affect the jobs market, data such as job openings and initial jobless claims have not yet signaled a turn. According to the Job Openings and Labor Turnover Survey (JOLTS) for September, job openings accelerated to 10.72 million, beating the +10 million estimate and up from an upwardly revised 10.28 million in August.

That said, the US non-farm payrolls report (NFP) on Friday offers gold’s next directional cue. According to a Bloomberg survey, analysts expect the US to add 200k jobs for October. That would be the weakest growth since December 2020, likely cooling Fed rate hike bets and dragging the USD and yields lower, a positive outcome for gold. The downside risk would be a stronger-than-expected number.

Gold – Speculator Positioning

Gold speculator trimmed their bullish bets on the metal, according to the latest Commitments of Traders report (COT) from the CFTC. For the week ending October 25, non-commercial shorts rose by 9,990, while longs held virtually unchanged. Those trades brought gold’s net long position to 59,342, the lowest since September, which was the weakest long position since April 2019.

Gold Versus Non-Commercial Long/Short Positions

gold cot chart

XAU/USD Technical Outlook

Gold is trading around 0.3% higher in Asia-Pacific trading, which trims the weekly loss to about 0.25%. A potential Double Bottom reversal is in play, which may mark the reversal point of a long-term downtrend. Prices need to break above resistance—the peak between the September and October troughs at 1,729.46—before a breakout is likely.

First, prices would need to clear the descending trendline and the 50-day Simple Moving Average (SMA). The measured move (distance between troughs and peak) puts the breakout target at 1,840.75. If prices fall below the troughs, it would invalidate the pattern. A positive divergence in the Relative Strength Index (RSI) lends support to a bullish outlook.

XAU/USD Daily Chart

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