Gold Price Forecast: Downbeat NFP Boosts Recovery

Gold prices rallied on Friday after disappointing Non-Farm Payrolls data that showed fewer job additions, a rising unemployment rate and lower wage inflation. These faltering metrics have trimmed bets of a 75 basis points rate hike by the Federal Reserve when it meets on 21 September. 

Data from the US Labor Department shows that US unemployment rate rose from 3.5% in July to 3.7% in August, while the number of non-agriculture jobs added to the US economy came in at 315K, less than the 526K added in July. Average Hourly Earnings (monthly) fell from 0.5% in July to 0.2% in August, indicating a loosening of pressure on employers to raise wages.

Lower wage inflation reduces the amount of money in circulation, as does a situation where fewer people are employed. These factors take off inflationary pressure from the economy. This is why the US Dollar is now on offer relative to gold in the XAU/USD pair, which has manifested as the 1.10% gain in gold price this Friday. US 10-year bond yields are also down 0.61% on the day.

Gold prices had been on the back foot all week as last week’s hawkish comments from the Fed Chair Jerome Powell had raised bets of a 75 bps rate hike in the 21 September meeting. However, the ADP (private sector) and NFP employment data are now showing that recessionary risks from the rate hikes may have started to creep in.

Gold Price Forecast

The 1716 resistance has capped the intraday uptick. The bulls must uncap this price level to clear the path toward 1739, the site of the 22 July/30 August highs. If the advance continues beyond this point, the 8 July/23 August highs at 1753 become the new upside targets. Additional barriers to the north are seen at 1772 (3/18 August highs) and 1787 (2 August high)

Conversely, rejection at 1716 allows the bears to push for a retest of 1696, with 1679 (30 March 2021 low) and 1670 (5 June 2020 low) coming into the picture if the bulls fail to defend the 1696 price support. 

XAU/USD: Daily Chart