Gold Subdued Ahead of the NFPs & after Thursday’s PCE-Fueled Rally

  • XAUUSD
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XAU/USD Analysis

Gold started the week on the back foot, but quickly moved into profits with a three-day rally, that culminated in four-month highs, fueled by Chair Powell's speech and US economic releases.

Mr Powell pointed to a slower pace of rate hikes, which could come "as soon as the December meeting", on Wednesday [1]. This was followed by softer inflation figures yesterday, as the Core PCE printed +5.0% y/y in October, from +5.2% previously. The headline figure eased to +6.0% y/y from 6.3% prior and the lowest level since the start of the year.

In the meantime, as series of jobs data showed a decline in private payrolls and job vacancies, which are also supportive of a less aggressive monetary stance by the Fed. The above developments have cemented markets expectations for a smaller 50 basis point rate increase this month.

XAU/USD rallied on the news and extends its gains from the best month of the year, breaking above the 38.2% Fibonacci of the 2022 high/low slump. This brings 50% Fibonacci in its crosshairs (1,842), but a pullback or a catalyst will be required for taking this resistance out and looking towards 1,880.

On the other hand, the Fed still expects to tighten further and Chair Powell talked of a higher terminal rate than previously expected and the need to hold policy at a restrictive level "for some time", so market reaction may be premature.

Furthermore, XAU/USD eases today and has not yet taken out the August highs (1,880), while the Relative Strength Index (RSI) reveals overbought conditions. This can create pressure back towards the 200Days EMA (at around 1,760), although further decline that would test the key 1,725-1 area, has a higher degree of difficulty.

Trade the News: View our Economic Calendar

In any case, the trajectory of the precious metal will likely be determined by today's US Employment Report, which has the potential to produce outsized moves.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 31 Jan 2023 https://www.federalreserve.gov/newsevents/speech/powell20221130a.htm

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