Gold (XAUUSD) Price Forecast: Profit-Taking Stalls Rally Ahead of NFP Report

Spot Gold Pulls Back as Traders Lock in Profits

Spot Gold (XAUUSD) is lower on Wednesday as this week’s unexpected surge prompted a fresh round of profit-taking. Traders also reassessed the impact of the U.S. raid on Venezuela over the weekend. Geopolitical risks initially drove prices higher in anticipation of an escalation of events. But the relative calm following the aggressive military action by the United States encouraged investors to take some money off the table.

At 13:32 GMT, XAUUSD is trading $4445.89, down $48.74 or -1.08%.

Strong Dollar Offsets Fed Rate Cut Speculation

Geopolitical risks may have also taken a backseat to a firm U.S. Dollar, which has drifted higher this week, despite calls for additional rate cuts from the Federal Reserve. Dovish Fed commentary and weaker-than-expected economic data are driving up the chances of a sooner-than-expected rate cut, which is also helping to drive the bullish narrative in gold.

Traders Brace for Critical Jobs Data Ahead

Another potential reason for today’s decline is position-squaring ahead of Friday’s U.S. Non-Farm Payrolls report. Before this report, however, gold traders will have the chance to respond to the ADP Non-Farm Employment Change report, ISM Services PMI and JOLTS Job Openings data.

Technical Analysis: 50-Day Moving Average Holds the Key

Technically, the main trend is up. A trade through the record high at $4,536.74 will signal a resumption of the uptrend. The main trend will change to down if $4,274.02 fails. However, buyers are likely to reemerge on a pullback into the intermediate 50% level at $4,211.60 and the 50-day moving average at $4,202.03.

The 50-day MA is what’s holding this entire rally together. If it is taken out with heavy selling pressure and conviction, the market could collapse on aggressive long-liquidation. Until then, the market will remain in “buy the dip” mode.

Short-Term Retracement Zone Under Pressure

The short-term range is $4,536.74 to $4,274.02. Gold is currently testing its retracement zone at $4,436.38 to $4,405.38. Holding this area will indicate the presence of strong buyers and a greater chance of a new record high.

However, if $4,405.38 fails as support, the odds of a pullback to last week’s low at $4,274.02 increase.

So ultimately, the near-term direction will be determined by trader reaction to the short-term retracement zone.

Jobs Report to Set the Tone for Next Move

Testing a retracement zone often indicates trader indecision. This week’s indecision is tied to Friday’s Non-Farm Payrolls report. A report indicating a strong labor market will buy the Fed more time before its next rate cut. This could pressure gold prices. A weak jobs outlook will have the opposite impact. The Fed will have to take notice if the labor market is weakening. Pressure will build to cut rates to save the economy. With that news, gold could begin another rally.

More Information in our Economic Calendar.