- Gold remains confined in a range as traders opt to wait for the release of the US NFP report.
- The USD stands firm near a one-and-a-half-year top, acting as a headwind for the commodity.
- Oil-driven inflation fears keep US bond yields near multi-year highs, further capping the bullion.
Gold (XAU/USD) extends its sideways move on Friday, trading below the $4,200 mark heading into the European session as traders await the release of US employment details. The US Nonfarm Payrolls (NFP) report is expected to show that the economy added only 90K jobs in September, down from the previous month's reading of 162K. Meanwhile, the Unemployment Rate is seen holding at 4.1%. Adding to this, annual wage inflation, as measured by the change in Average Hourly Earnings, will offer fresh cues about the Federal Reserve's (Fed) future policy path amid receding October rate-hike bets. This, in turn, will drive the US Dollar (USD) and provide some meaningful impetus to the non-yielding bullion.
A slew of influential FOMC members recently indicated that they do not see an urgent need for an immediate interest rate hike after the widely expected quarter-point increase at the September meeting. Meanwhile, the Institute for Supply Management (ISM) reported on Thursday that economic activity in the US manufacturing sector expanded for the ninth straight month in September. Additional details of the survey revealed that raw material prices increased for a 24th consecutive month. This comes on top of inflationary concerns stemming from volatile energy prices, which underpin prospects for additional Fed tightening and help limit the overnight pullback in US bond yields from multi-year highs. Apart from this, the US-Iran standoff continues to support the USD and acts as a headwind for the commodity.
The Wall Street Journal reported that the Pentagon may soon send a third aircraft carrier strike group and 10,000 sailors and Marines to the Persian Gulf. Separately, Iran’s Persian Gulf Strait Authority (PGSA) said several tankers were attacked in the Strait of Hormuz in recent days. Adding to this, US President Donald Trump said on Wednesday that he would decide very soon whether to blow up Iran and added that the war will end very soon one way or the other. This keeps the geopolitical risk premium firmly in play and favors USD bulls, warranting some caution for XAU/USD bulls. Hence, it will be prudent to wait for strong follow-through buying before confirming that the Gold price has formed a near-term bottom around the $4,100 mark and positioning for any meaningful appreciation move.
XAU/USD 4-hour chart
Technical Analysis
The XAU/USD pair keeps a bearish near-term tone below the 200-period Simple Moving Average (SMA) on the 4-hour chart and the mid-range Fibonacci retracements. However, the Moving Average Convergence Divergence (MACD) indicator remains in positive territory with the line above its signal and a still-constructive histogram. Meanwhile, the Relative Strength Index (RSI) around 43 hints at a potential pause in the downside rather than a clear bullish reversal.
Hence, any positive move beyond the $4,200 mark is more likely to confront immediate resistance near the 61.8% retracement at $4,230. The 50% level at $4,319 forms the next nearby topside barrier ahead of the 200-period SMA at $4,386 and the 38.2% retracement at $4,408. This reinforces a dense supply zone, with the 23.6% retracement at $4,519 marking a more distant cap that would need to be reclaimed to meaningfully challenge the current bearish bias. On the downside, initial support is seen at the 78.6% Fibo. retracement at $4,103, ahead of the prior swing low near $3,942.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.