Will US Non-Farm Payrolls Drive XAU/USD to New Highs?

• The price of gold is extending a secondary trend below the key resistance of $2,670 amid the Israel-Iran conflict.
• The US dollar is off six-week highs as traders reposition ahead of Nonfarm Payrolls data.
• The price of gold remains above all key daily averages and the RSI remains in the bullish zone, indicating a new upside.

The price of gold is extending its consolidation phase below the key static resistance of $2,670 for the third day in a row. Gold traders are eagerly awaiting high-impact US non-farm payrolls (NFP). data for the next push higher as geopolitical escalation in the Middle East persists.

US non-farm payrolls are holding down the key for the next gold price direction

Heading into the US NFP showdown, traders are resorting to readjusting their position by taking profit from the recent rise in the US dollar (USD), injecting new signs of life into gold prices. The greenback retreated early on Friday after hitting six-week highs against its main rivals on Thursday, thanks to recent strong US employment data and the ISM Services PMI. Upbeat US economic data eased bets for a 50 basis point interest rate cut by the Federal Reserve (Fed) in November.

Data on Wednesday showed U.S. ADP private sector employment rose by 143,000 jobs for September, accelerating from an upwardly revised 103,000 in August and better than the estimate of 120,000. Meanwhile, the US ISM Services PMI jumped from 51.5 to 54.9 in September, above the forecast of 51.7, while marking the highest reading since February 2023.

Markets are currently pricing in about a 34 percent chance the Fed will opt for a big rate cut at its next meeting, compared with nearly 60 percent last week, CME Group’s FedWatch Tool shows. The price of non-interest-bearing gold is struggling amid reduced bets on aggressive Fed easing. However, the decline in the gold price remains dampened by the intensifying geopolitical tensions between Iran and Israel.

Following Iran’s missile attacks on Israel in retaliation for the killing of leaders of the Tehran-backed Hezbollah militant group last week, Israel responded by striking an apartment in central Beirut, killing nine people. The Lebanese army returned Israeli fire for the first time in nearly a year of fighting between Israel and Hezbollah. Rising risks of the Israel-Iran conflict turning into a wider regional war in the Middle East continue to support the traditional gold price.

The next direction of the gold price, however, will be determined by the upcoming US payrolls data, which should show that the economy added 140,000 jobs in September, compared to August’s gain of 142,000. The unemployment rate is set to hold steady at 4.2 percent over the same period, while annual average hourly earnings are likely to rise 3.8 percent in September, the same pace seen in August.

A positive surprise in the headline NFP figure and wage inflation data could bolster bets for a 25bps Fed rate cut in November, adding further elements to the US dollar’s recovery at the expense of the gold price. Conversely, a big disappointment could revive expectations that the Fed would opt for an excessive rate cut at its next meeting, crushing the USD across the board. In such a case, the price of gold could jump back to the record level of $2,686.

The US labor market report will be key to gold price action, while traders will also be closely watching a speech by New York Fed President John Williams for further policy guidance.

Gold Price Technical Analysis: Daily Chart

The short-term technical outlook for the gold price remains more or less the same, with buyers motivated as long as the 14-day Relative Strength Index (RSI) remains in bullish territory. The leading indicator is currently trading near 68.

Gold price needs to produce a daily candlestick close above static resistance near $2,670 for further upside. The next resistance is lined up at the record high of $2,686.

Above, buyers will target the $2,700 round level, followed by rising trendline resistance, now at $2,752.

On the other hand, acceptance below the September 24 low of $2,623 is essential to unleash further decline towards the $2,600 threshold, where the 21-day simple moving average (SMA) coincides.

Gold sellers could then challenge the September 20 low of $2,585.