Gold (XAUUSD) Price Forecast: Bearish Gold Market Faces NFP Reality Check

Gold Steady as Payrolls Loom

Spot Gold (XAUUSD) is down $8.03 or 0.18% at 10:53 GMT on Friday. The market tested the 200-day moving average at $4,428.44 early in the session, posting an intraday low at $4,428.27. The May Nonfarm Payrolls report drops this morning and this is the number that decides whether the higher-for-longer rate story holds or breaks.

Consensus is 80,000 jobs. Goldman Sachs expects 60,000. EY-Parthenon expects 50,000. Vanguard is looking for just 20,000. April came in at 115,000. The trend is pointing lower and if the low-end estimates are right, the rate-cut trade that has been dead all week comes back to life.

Labor Market Shows Cracks Beneath the Surface

The headline payroll number is only part of the story. The labor market underneath it has been softening for weeks. Job openings rose in April but the quits rate fell to its lowest level since August 2020. Workers are not leaving their jobs. That tells you confidence in finding something better has dried up.

Economists are calling it a low-hire, low-fire market. Companies are not cutting aggressively but they are not adding either. The workers who have jobs are holding on tight. The ones looking for work are running into a wall that the headline data does not show.

That kind of stagnation is what shows up before the payroll numbers start dropping hard. It is already visible in the data around the edges. The question is whether it shows up in this morning’s print.

Layoffs Surge to Post-Pandemic Highs

Challenger, Gray & Christmas reported 97,006 planned job cuts in May. That is a 16% jump from April and the highest May total since 2020. Take out the pandemic and it is the worst May since the financial crisis.

Artificial intelligence-related layoffs hit 38,000 during the month. That is the highest level since Challenger started tracking the category. Initial jobless claims climbed to their highest reading since February earlier this week.

None of these numbers guarantee a weak payroll print on their own. All of them together tell you the labor market is losing momentum and it is losing it faster than the headline data has been showing.

Rising Crude Oil Keeps the Fed Trapped

Spot Brent crude oil gained nearly 3% this week on continued Middle East tensions. That is the wrong direction for Spot Gold (XAUUSD). Higher crude oil pushes inflation higher. Higher inflation keeps the Fed pinned in place. Cleveland Federal Reserve President Beth Hammack said this week that rate hikes are still possible if inflation does not cooperate and she pointed directly at energy costs.

The ceasefire between Israel and Lebanon helped crude oil pull back on Thursday but the Strait of Hormuz is still restricted. As long as crude oil stays elevated the Fed does not have room to cut even if the labor market weakens. That is the trap gold is sitting in right now. A weak payrolls number alone may not be enough. Gold needs weak jobs AND falling crude oil to get the full relief trade.

Daily Spot Gold (XAUUSD) Technical Analysis

Daily Spot Gold is edging lower on Friday. Earlier in the session, the market tested the 200-day moving average at $4428.44, posting an actual intraday low at $4428.27.

The market is also trading on the weak side of $4481.78, which is the line that separates the Bull Market from the Bear Market.

The bullish set up is simple. Hold the 200-day moving average, produce enough upside momentum to overtake $4481.78 and take a run at the 50-day moving average at $4630.16, which has been capping gains since late March.

The bearish set up requires the long-term traders to pull their bids at or under the 200-day moving average. This could trigger a fast break into the minor bottom at $4366.23. If this price is taken out with conviction and heavy volume, prices could collapse hard. There is no major support until $4099.12.

What to Watch

The May Nonfarm Payrolls report is the gate for Spot Gold (XAUUSD). Consensus at 80,000 jobs is already a slowdown from April’s 115,000. Goldman Sachs, EY-Parthenon, and Vanguard are all below that. The labor market data around the edges, quits rate at a four-year low, Challenger layoffs at post-pandemic highs, jobless claims climbing, all say the weakness is already there. If it shows up in this morning’s print the rate-cut trade comes back and gold gets the bid.

The problem is crude oil. Spot Brent crude oil gained nearly 3% this week and the Strait of Hormuz is still restricted. As long as energy costs stay elevated Cleveland Federal Reserve President Beth Hammack and the rest of the committee have cover to stay restrictive. Gold needs weak jobs and falling crude oil at the same time to break out of the range it has been stuck in.

The 200-day moving average at $4,428.44 held again early Friday. A sustained hold above $4,481.78 shifts the tone bullish and targets the 50-day moving average at $4,630.16. A break below the 200-day opens the door to $4,366.23 and there is nothing major between there and $4,099.12.

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