- Gold bulls took charge of the build-up to the NFP showdown.
- Bulls are eyeing a deeper correction towards the golden ratio of 61.8%.
The price of gold jumped on Thursday as US bond yields fell and the Bank of England warned that the UK economy could be heading for a recession later this year with inflation hitting 13%. XAU/USD pushed Don into its weekly bullish correction to hit a high of $1,794.23. Gold for December delivery was printing above $1,800 an ounce.
Gold benefited from falling US bond yields, bullish for gold since it offers no yield. The US 10-year note was last seen paying 2.699%, down 0.26% on the day. The US Dollar was lower than most major currencies on Thursday, down around 0.5% at the time of writing according to the DXY at 105.81. The positive impact of hawkish comments from the Federal Reserve faded this week as investors waited for more signs on the data front. Friday’s nonfarm payrolls and next week’s inflation data will be crucial.
The Fed raised rates by 75 basis points at its June and July meeting. For now, money markets are pricing in a 50 basis point hike at the Fed’s September meeting and a roughly 44% chance of another massive 75 basis point hike. Today, Loretta J. Mester, president of the Federal Reserve Bank of Cleveland, said Thursday that the Fed should raise interest rates above 4% to bring inflation back to its target.
“I would pencil in a little above four, if any,” Mester told reporters following an event at the Economic Club of Pittsburgh, referring to the central bank’s key rate. “It’s not unreasonable, I think, to maintain this as where we come to and then we’ll see.”
- ”We will need to raise interest rates and keep them there for a while.
- Then we’ll bring them back once inflation moves closer to our 2% target.
TD Securities analysts explained that ”As Fedspeak pushed back on the FOMC’s dovish market interpretation, and yesterday’s data surprised on the upside, seeing rates and prices from the September hike rise, the The gold market is trading so far with a mind of its own.”
“CTA triggers for extra short coverage are at your fingertips. Indeed, we believe that prices closing above $1789/oz would catalyze enough of a change in momentum to see trend followers targeting a roughly flat net position,” the analysts added. “However, with Nonfarm Payrolls headlining the week tomorrow, our expectations of a stronger than expected report could quickly limit the current uptrend among gold bugs.”
The monthly U.S. nonfarm payrolls report will be closely watched on Friday after Thursday’s data showed an increase in jobless claims.
“A strong payroll print should contribute to a further market price rebound in terminal pricing. This should put pressure on initial rates and continue to flatten the 2s10s curve. We remain short of January 2023 fed funds futures to position ourselves for a Fed rate hike,’ TD Securities analysts said.
Gold technical analysis
According to the previous analysis, Gold Price Prediction: XAU/USD bulls are back, it was explained that the price was rising during a correction from the weekly M formation:
The gray area was a price imbalance that has now been smoothed out by a 50% average reversion:
There is scope for further upside with the prior Fibonacci meeting structure at 61.8% around $1,800.