Gold (XAUUSD) Price Forecast: Will Warsh and NFP Trigger Gold’s Next Major Move?

Gold Bounced Off $3,942 but the Buying Looks Like Bargain Hunting, Not Conviction

Spot Gold is trading at $4,022.01 at 12:23 GMT Tuesday, up $5.05 or 0.13%. The metal hit $3,942.10 earlier in the session before recovering to an intraday high of $4,037.67. That is a $95 range on the day and the bounce from the low is getting attention. The question is whether it means anything.

The rebound looks like bargain hunting after one of the weakest quarters in more than 13 years. Traders have been selling every rally for weeks. The aggressive dip-buying that powered gold’s advance earlier this year has been replaced by quick profit-taking on bounces. Reuters noted that gold would need to reclaim $4,100 before many traders believe a meaningful bottom is in place. The market is not there yet and two events in the next 48 hours will determine whether it gets there or heads lower.

Daily Spot Gold (XAUUSD) Technical Analysis

Spot gold recovered from an early session low at $3942.10 on Tuesday. The bounce has traders asking whether this is the start of something or just aggressive buyers defending the multi-month bottom at $3886.46. Follow-through to the upside will answer that. How far the move extends and how long it lasts will shape the short-term outlook.

The short-term range is $4382.62 to $3942.10. I can build a case for a short-covering rally into its retracement zone at $4162.36 to $4214.34. Trader reaction to the test of this area will determine the near-term direction of gold.

A sustained move under $4162.36 to $4214.34 or a failed breakout over this zone will indicate that sellers are still in control. If this creates enough downside momentum then look for them to press the multi-month bottom at $3886.46. This is a major support area because if it fails, spot gold could drop sharply with no visible support until the next multi-month bottom at $3087.70.

Once $3886.46 is taken out with conviction, we’re going to see either an acceleration to the downside or a slow stair-stepping grind.

The catalyst behind heavy selling pressure could be a more hawkish tone from Fed Chair Warsh on Wednesday, or an extremely bearish U.S. Non-Farm Payrolls report on Thursday.

On the upside, traders will be watching the $4162.36 to $4214.30 retracement zone. New short-sellers are likely to re-emerge or a sustained breakout could lead to a test of the 50-day moving average at $4438.68 and the 200-day moving average at $4477.67.

The Dollar and Yields Are Not Giving Gold Any Room

The dollar is heading for its second consecutive monthly gain. CME FedWatch has the September rate hike probability at about 64% with traders expecting additional tightening before year-end. That is the number gold is trading against. As long as the market believes rates are going higher, the dollar stays bid and gold pays for it.

The 10-year is near 4.39%. The 2-year is holding around 4.13%. Neither moved much Tuesday but they do not need to move to keep pressure on gold. At these levels the yield advantage over a non-paying asset has been the trade for months. Tuesday’s bounce did not change that.

Warsh in Sintra Wednesday Is Not a Normal Central Bank Speech

Warsh speaks at the European Central Bank’s annual forum in Sintra on Wednesday. Under normal circumstances the conference is academic. This year it is Warsh’s first major international appearance as Fed Chair and it comes after he eliminated traditional forward guidance from Fed communications. The market has fewer signals to work with under Warsh and that makes every public appearance more important.

Traders are not looking for a rate decision. They are listening for tone. Does Warsh keep emphasizing inflation as the top priority the way he did at the June meeting or does he acknowledge risks to growth and the labor market. The difference between those two messages moves the dollar, yields, and gold in opposite directions.

A hawkish Warsh confirms that additional hikes are on the table. The dollar firms, yields hold, and gold’s bounce from $3,942 stalls before it reaches $4,100. A more balanced Warsh who discusses slower growth or softer labor conditions gives traders a reason to reduce rate hike bets. The dollar softens, yields ease, and gold gets room to extend the recovery.

Warsh has made it clear that the Fed intends to say less going forward. That means the words he does say carry more weight. Wednesday is the first test of how the market prices a quieter Fed Chair at an international forum.

Thursday’s Payrolls Report Could Matter More Than the Speech

The June nonfarm payrolls report lands Thursday morning and it may override whatever Warsh says Wednesday. Employment data is one of the Fed’s most closely watched indicators and a strong number after a hawkish speech would confirm the entire narrative that has been crushing gold.

A stronger-than-expected print reinforces the view that the economy can handle higher rates. The September hike probability at 64% holds or climbs. The dollar and yields stay elevated. Gold’s worst quarter in 13 years extends into July.

A miss changes the calculus. Signs that hiring is slowing or unemployment is rising give traders a reason to question whether the Fed needs to keep tightening. Yields ease. The dollar pulls back. Gold gets the first real demand catalyst it has had in weeks.

Average hourly earnings and the unemployment rate will matter as much as the headline number. Strong wage growth keeps inflation concerns alive even if job creation disappoints. Softer wage pressures reinforce the case that inflation is cooling gradually. The details often move rate expectations as much as the payrolls figure itself.

What to Watch

The next 48 hours could be a turning point or another failed rally before sellers take back control. Warsh speaks Wednesday. Payrolls land Thursday. Both events feed directly into the dollar and yield outlook that has been driving gold lower for months.

Gold bounced from $3,942 Tuesday but the buying does not look like conviction. The market needs to reclaim $4,214.30 before the bottom conversation starts and it needs at least one of the two upcoming events to break in the bulls’ favor to get there.

A less hawkish Warsh followed by a soft payrolls print is the combination that gives gold room to run at the retracement zone. A hawkish Warsh followed by a strong jobs number is the combination that puts the multi-month bottom back under pressure. The direction of the dollar and yields over the next two sessions is the only thing that matters for gold right now.

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