Gold Price Forecast XAU/USD – Weak Jobs Data Will Support Expectations of Moderation in Fed Rate Hikes

Gold futures are edging lower on Friday as nervous investors pared long positions ahead of today’s U.S. Non-Farm Payrolls report. Nonetheless, the market remains in a position to post its second straight weekly gain on growing expectations of a moderation in the pace of U.S. rate hikes.

At 11:56 GMT, February Comex gold futures are trading $1812.50, down $2.70 or -0.15%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $167.83, up $3.02 or +1.83%.

A steep drop in Treasury yields and the U.S. Dollar have been mainly responsible for gold’s strength this week. The yield on the 10-year Treasury is trading flat early Friday, but yesterday it fell by as many as 19 basis points. The 2-year Treasury yield was last down by around four basis points to 4.2118%.

Gold prices have risen 2.5% so far this week, as the rival safe-haven dollar headed for a weekly loss of about 1%. A weaker greenback tends to drive up foreign demand for dollar-denominated bullion.

Month-long Rally Continues

Gold bottomed last month on November 3, one day before the October Non-Farm Payrolls report that featured an unexpected rise in the Unemployment Rate. This event may have been responsible for launching the current $186.30 rally.

The rally continued throughout the month on the back of a cooler-than expected U.S. consumer inflation report and less-hawkish Fed minutes that signaled the Federal Open Market Committee (FOMC) may be considering slowing the pace of future interest rate hikes at its December policy meeting.

This idea was supported earlier this week when Fed Chairman Jerome Powell ignited the current rally by echoing the tone of the minutes and several Fed members, and indicating that central bank policymakers were open to slowing down the pace of rate hikes.

This notion was further supported by economic data on Thursday that showed a drop in the number of job openings, manufacturing and inflation.

Daily Forecast

Trader reaction to today’s U.S. Non-Farm Payrolls report could produce a similar reaction to last month’s report if the data confirms the labor market is weakening. Slower than expected jobs growth combined with an uptick in the unemployment rate should support the outlook that the Fed will begin scaling down its rate hikes. This should put pressure on interest rates and the U.S. Dollar, while supporting gold prices.

Traders are looking for the Non-Farm Employment Change so show the economy added 200K jobs in November. The Unemployment Rate is expected to remain steady at 3.7% and Average Hourly Earnings may have risen by 0.3%.