Gold Price Rebound Stalls Ahead of US Non-Farm Payrolls (NFP) Report

Gold Price Talking Points

The price of gold stages a near-term rebound following the failed attempt to test the January low ($1779), but the recent advance appears to be stalling ahead of the US Non-Farm Payrolls (NFP) report as the update is anticipated to show a further improvement in the labor market.

Gold Price Rebound Stalls Ahead of US Non-Farm Payrolls (NFP) Report

The price of gold appears to be tracking the January range as it extends the rebound from last week’s low ($1780), and bullion may stage a larger recovery over the coming days as it clears the series of lower highs and low following the Federal Reserve interest rate decision.

However, fresh data prints coming out of the US may undermine the recent advance in the price of gold as the NFP report is anticipated to show the economy adding 150K jobs in January, and a positive development may put pressure on the Federal Open Market Committee (FOMC) to normalize monetary policy sooner rather than later as the central bank unveils a more detailed exit strategy.

Source: CME

In turn, speculation for an imminent change in regime may drag on the price of gold as the CME FedWatch Tool continues to reflect a 100% probability for at least a 25bp rate hike in March, and it remains to be seen if the central bank will deliver a series of rate hikes over the coming months as Chairman Jerome Powell and Co. look to winddown the balance sheet later this year.

With said, expectations for higher US interest rates may produce headwinds for the price of oil, but bullion may trade within a defined range over the near-term as it reveres ahead of the January low ($1779).

Gold Price Daily Chart

Source: Trading View

• The broader outlook for the price of gold remains relatively flat as the 50-Day SMA ($1802) and 200-Day SMA ($1806) continue to converge with one another, and the precious metal may trade within a defined range as it tracks the price action from the fourth quarter of 2021.
• The price of gold appeared to be on track to test the January low ($1779) following the failed attempt to test the November high ($1877), but bullion may continue to trade within last month’s range as it defends the advance from last week’s low ($1780).
• Need a break/close above the Fibonacci overlap around $1816 (61.8% expansion) to $1829 (38.2% expansion) to open up the $1837 (38.2% retracement) to $1847 (100% expansion) region, with a break above the January high ($1854) bringing the $1859 (23.6% retracement).
• At the same time, lack of momentum to break/close above the Fibonacci overlap around $1816 (61.8% expansion) to $1829 (38.2% expansion) may spur another run at the January low ($1779), with a move below the $1762 (78.6% expansion) to $1771 (23.6% retracement) region opening up the December low ($1753).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong