Gold (XAUUSD) Price Forecast: Weak Payrolls Could Put $4,162.36 in Play

Weak ADP Lifts Gold Ahead of June Payrolls

Spot Gold (XAUUSD) is trading at $4,067 at 12:00 GMT Thursday, up $35 or 0.9% from yesterday’s close near $4,030. The metal bounced off a seven-month low earlier this week and the dips are not sticking. Soft ADP numbers, falling oil, and a weaker dollar all converged this morning and gold caught the bid heading into the June payrolls report at 12:30 GMT.

That number is the whole trade today. Everything else is positioning ahead of it.

ADP Miss Already Has Traders Leaning One Way

Private payrolls came in at 98,000 for June against expectations of 110,000 to 118,000. May printed 122,000. That is a clean miss and gold moved on it immediately. September hike odds are already running around 64%, and a soft official number later today pulls those odds down. Gold has room to extend off the seven-month low in that scenario.

Every dip this week got bought fast. Traders are not comfortable staying short heading into a payrolls print that the ADP already softened up. That kind of buying pressure into weakness tells you where positioning stands before the number drops.

Gold Traders Already Know What Falling Oil Means

The U.S. and Iran wrapped up another round of indirect talks on the Strait of Hormuz. Nothing concrete came out of it, but crude dropped on the fact that they were still at the table. Gold traders already know what falling oil does to the rate outlook. Less inflation pressure takes urgency off the Fed, and that is the only story gold is trading right now.

Oil pulling back alongside a weak jobs preview is the combination that points away from a September hike. That is all gold needs to hold above the seven-month low.

Warsh Talked Down Inflation But Gave Nothing Away

Fed Chair Kevin Warsh said inflation expectations and risks have come down in recent weeks but repeated the Fed is still committed to 2% and prices are still too high. That is Warsh staying in the middle. No signal on the next move, no hint at timing.

Markets are pricing over 70% odds that rates hold at the July meeting. September is the live meeting with hike odds at 60% to 64%, and that is the number today’s report can move the most. Warsh not tipping his hand means the payrolls data at 12:30 GMT is making the decision for him.

Dollar Gave Back Ground While Yields Held

The dollar index dropped about 0.4% to around 101 after Warsh softened the inflation tone. The dollar had been running, hitting a 14-month high recently on rate expectations, and today’s pullback opened room for gold. The 10-year yield ticked up to around 4.49% but the move was too small to matter. Gold is trading the dollar today, not yields.

Payrolls at 12:30 GMT Decides the Afternoon

Consensus for June nonfarm payrolls runs between 114,000 and 175,000 with the middle around 115,000. Unemployment is expected to hold at 4.3%. Average hourly earnings are forecast at 0.3% month over month and 3.5% year over year. The wage number matters almost as much as the headline count. Pay growth running too hot gives the Fed cover to move in September regardless of the jobs number.

A print above 150,000 pushes September hike odds higher and the dollar takes back everything it lost this morning. Gold gives up today’s gains in that trade. Below 100,000 pulls those odds down and gold extends the rally. Revisions to prior months can surprise too. With 64% September hike odds already priced in, any miss in either direction reprices fast, and that is why this afternoon gets volatile once the number drops.

Spot Gold (XAUUSD) Technical Analysis

Spot gold begins today’s session in a downtrend according to its daily swing chart and its relationship with the 50-day and 200-day moving averages at $4411.94 and $4480.61, respectively.

The short-term range is $4382.62 to $3942.10. Its retracement zone at $4162.36 to $4214.34 is the key area to watch today. A sustained move over $4214.34 will indicate the presence of buyers. If this move creates enough upside momentum then look for a near-term surge into the main top at $4382.62 and the moving averages at $4411.94 to $4480.61

On the downside, the minor bottom is $3942.10. The main bottom is $3886.46. This level is critical to the long-term structure. My daily chart indicates that this could be the trigger point for an acceleration to the downside with $3087.70 the next major target.

Daily U.S. Dollar (DXY) Technical Analysis

The U.S. Dollar Index is weak on Thursday, but the main trend is up. Today’s price action also shifted momentum to the downside.

Taking out 101.800 will signal a resumption of the uptrend with 101.977 the first target. The short-term range is 99.384 to 101.800. If the selling pressure increases later today then look for the move to extend into its retracement zone at 100.592 to 100.307.

Daily U.S. Government Bond 2-Year Yield Technical Analysis

The U.S. Government Bond 2-Year Yield is edging higher for a third session on Thursday. The yield is currently in an uptrend according to the series of higher top and higher bottoms. The 50-day moving average at 4.03% is also trending higher.

Traders are currently testing the mid-point of the 4.236% to 4.070% range at 4.153%. A sustained move over this level could create the momentum to challenge 4.236%. If sellers defend this level then the 2-year yield could retreat into the swing bottom at 4.070% and the 50-day moving average at 4.034%.

What to Watch

The ADP, falling oil, and a softer dollar all pushed in the same direction this morning and gold responded. The question is whether the official payrolls number at 12:30 GMT confirms that setup or contradicts it. Everything about today’s positioning says traders are leaning toward a soft print. If they are wrong, the reversal will be fast because the move off the seven-month low was built on rate expectations, not a fundamental change in the gold market.

The daily swing chart has gold in a downtrend well below the moving averages. The retracement zone at $4,162.36 to $4,214.34 is where any real rally gets tested. On the downside, $3,886.46 holds the long-term structure, and a break there opens an acceleration to much lower levels.

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