XAU/USD bulls await US NFP report before positioning for further gains

• Gold price remains supported near weekly high amid Fed-inspired USD selloff.
• Renewed concerns about an economic downturn are further supporting the haven commodity.
• Bulls are turning cautious and eyeing the crucial US NFP report before positioning for further gains.

The price of gold (XAU/USD) is trading in a positive trend for the third day in a row and is placed around the $2,520 area, or the upper end of the weekly range during the early European session on Friday. However, the upside appears limited as traders remain cautious ahead of the crucial US Non-Farm Payrolls (NFP) report, which could influence market expectations of the possibility of further interest rate cuts by the Federal Reserve ( Fed) in September. This, in turn, will play a key role in boosting demand for US dollars (USD) and provide a new directional boost to the unyielding yellow metal.

Meanwhile, markets have a 40% chance the Fed will cut borrowing costs by 50 basis points (bps) at the end of its September 17-18 policy meeting. The stakes were raised by a mixed bag of US employment data released this week that provided evidence of a deteriorating labor market. In fact, a report on Wednesday showed that US job openings fell to a three-and-a-half-year low of 7.673 million in July. In addition, Automatic Data Processing (ADP) reported on Thursday that private sector employment posted the slowest increase since January 2021 and rose by 99,000 in August.

In addition, Chicago Fed President Austan Goolsbee said on Friday that the longer-term trend in labor market data and inflation warrants easing interest rate policy soon and then steadily over the next year. That keeps US Treasury bond yields low at their lowest levels in more than a year and drags the USD off a two-week high hit on Tuesday, which in turn is seen as providing some support to gold prices. Therefore, even a slight disappointment from the closely watched monthly US jobs data could prove negative for the greenback and pave the way for a significant upside for the commodity.

Instead, the market’s immediate reaction to the better-than-expected report is more likely to be limited amid the prospect of an imminent start to the Fed’s rate-cutting cycle. However, the price of gold remains on track for modest weekly gains, and the fundamentals appear to be tilted firmly in favor of bullish traders.

Technical perspectives

Technically, sustained strength beyond the $2,524-$2,525 hurdle will reaffirm the short-term positive outlook. With the oscillators on the daily chart remaining in positive territory and still far from being in the overbought zone, the price of gold could aim to break the all-time high around the $2,531-$2,532 region reached in August. Further upward movement should pave the way for a resumption of a well-established uptrend seen over the past two months or so.

On the other hand, the psychological $2,500 mark now appears to protect the immediate downside, below which the gold price could slide to the horizontal support of $2,471-$2,470. A convincing break below the latter will set the stage for deeper losses towards the 50-day simple moving average (SMA), currently pegged near the $2,440 region, en route to the $2,400 threshold and 100-day SMA, around the $2,388 area.

XAU/USD Daily Chart