Gold is struggling for a direction, while trading under the $4,100 mark early Friday, although remaining confined in a familiar range. Despite the range-play, Gold is set to end the week on a subdued note.
Gold eyes a negative close to the week
Markets remain wary about whether the US Federal Reserve (Fed) will cut or not cut interest rates in December, especially after the dated September US employment report released Thursday.
The headline US Nonfarm Payrolls (NFP) rose by 119,000 in September, following a 4,000 decrease (revised from +22,000) recorded in August. The reading outpaced the market forecast of 50,000.
Meanwhile, the Unemployment Rate rose to 4.4% from 4.3% in this period. The mixed data provided an ambiguous picture of the Fed’s path forward on interest rates.
However, markets continued to price in about a 40% chance that the Fed will lower rates next month as policymakers remained cautious on further monetary policy easing.
“Cleveland Fed President Beth Hammack warned on Thursday that cutting rates further right now carries a wide range of risks for the economy. Fed Governor Lisa Cook sees a risk of outsized asset price declines.”
The hawkish sentiment surrounding the Fed is weighing on non-yielding assets such as Gold. But Gold’s downside appears cushioned by the tech sell-off on Wall Street and later in the Asian markets as the solid Nvidia earnings-led rally faded.
Expectations of a massive economic stimulus package due to be unveiled by Japan’s government later on Friday also help keep Gold buyers hopeful. The package is estimated to be worth over JPY 20 trillion, the biggest since COVID-19.
Traders now eagerly await the S&P Global preliminary PMI data for November from the United States (US) for fresh insights on the health of the US economy The data could help markets reprice Fed rate cut expectations, eventually impacting Gold price action.
The US Manufacturing PMI is set to fall to 52 in November from 52.5 in October. The Services PMI is likely to stay unchanged at 54.8 in the reported period.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,065.29. The 50-, 100-, and 200-day Simple Moving Averages (SMAs) advance while price holds above them, maintaining a bullish bias. The 21-day SMA has flattened and edged lower, with $4,044.66 offering nearby dynamic support. The Relative Strength Index (RSI) stands at 52.00 (neutral), reflecting balanced momentum after the recent rebound.
Measured from the $4,381.17 high to the $3,885.84 low, the 38.2% retracement at $4,075.05 acts as near-term resistance, and a daily close above it would open the 50% retracement at $4,133.50. With momentum neutral and trend support intact, the path of least resistance would improve on a break of this barrier, while failure to clear it would keep gains capped and risk a return to the rising averages.
(The technical analysis of this story was written with the help of an AI tool)
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.
