XAUUSD started the day in green before turning red in early trading hours on Friday, as investors reacted to strong US Nonfarm Payroll data. Gold opened trading at $2,065 an ounce, but shed 1.03% to trade at $2,043 at the time of writing. The US Bureau of Labour Statistics announced at 13:30 GMT that the US economy added 353,000 Nonfarm jobs in January, almost doubling the consensus estimate of 187k jobs. For the second month in a row, the US employment figures surpassed projections, creating strong grounds for further delays in Fed rate cuts.
The Fed indicated on Wednesday that it was reluctant to cut benchmark interest rates in the first quarter of 2024. Furthermore, Fed Chairman Jerome Powel emphasised that the focus remains on bringing inflation to 2%. Therefore, the strong show by the US economy supported by the latest jobs figures could prop up the dollar and exert downward pressure on gold.
The strong January jobs data shifts greater focus to US inflation figures. XAUUSD will also come under pressure from the stock market following the strong performance reported by tech stocks on Friday. Meta, Facebook’s parent company announced dividends for the first time, alongside $50 billion share buyback program. More investors will likely look to channel their funds to tech stocks, as the industry overcomes the FUD sentiment created in the last year.
However, XAUUSD could yet benefit from China’s economic woes as its stock market contracts. Investors will likely be keen to diversify their portfolio rather than bet entirely on the US stock market. Gold will certainly offer an alternative option for those who opt to wait for the next US inflation data and benchmark rate decision.
Technical analysis
XAUUSD momentum has lost strength, with the RSI below 50 making a strong case for likely downward action. The support is currently at 2034.90, but if the current momentum continues, it will likely move further down to 2027.30. The commodity needs to stay above 2041.90 to have a shot at the first resistance at 2053.25. A breach of R1 could see XAUUSD build momentum to target 2070.05, and possibly reach as high as 2078.15.