XAUUSD - The precious metal gold has been on a strong bullish trend for three consecutive weeks. The bulls have continuously pushed the price higher after it fell as low as $1682.20 in July. The price had made a first attempt to reclaim the psychological resistance at $1800 during the Asian session today but was cut short at $1794.50. The bulls seem to be taking profits at this level as the market awaits the NFP report. The NFP report, which measures the improvement in job creation excluding the farm industry, is due to be released today. To accompany it also is the report on the average hourly earnings of an average worker in the US for the just concluded month of July.
Analysts are currently forecasting a possible short retracement for gold at the level after it formed a double bottom at this point, as could be seen in the four hours time frame. The buying pressure seems to be gradually diminishing at this point too.
Gold prices have benefited massively this week from the waning dollar strength. The fact that the dollar index has remained below 106 has largely profited the precious metal.
Additionally, the fears of a possible US lockdown due to the spread of monkeypox had pushed more investors into gold.
Gold has once again become the safe haven among investors as the fears of recession increase across the globe. The high inflation rate witnessed across borders has presented gold as a remedy to the ugly situation.
The outcome of the NFP report today will be very significant for gold prices. Positive readings from this data will strengthen the US dollar and support a reversal in gold prices at the present level. In contrast, a negative reading from the NFP report will push gold above $1800.
Similarly, investors are to pay attention also to the outcome from the reading on the average hourly earnings of workers in the US will accompany it also. This data gives the change in the amount paid for labour by various companies and other businesses in the US in the previous month and excludes the farm industry. An increase in this reading points to an improvement in the labour market. This will favour the US dollar and limit further price surges in gold today.
On the contrary, a lower reading from this data is suitable for gold to continue towards $1800. The forecast for this data is the same as the previous reading given as 0.3%.
These two reports put together will determine the performance of gold today. Hence, it becomes necessary for investors to pay attention to the outcome of these data while taking positions in either long or short gold prices today.
What impact will the NFP report have on gold prices today?
NFP reports often state the average number of unemployed people in the previous month, excluding the farm industry. The unemployment rate data is an essential economic data influencing the US dollar considerably. An increase in the unemployment rate discourages investors from coming into the country. This reduces the demand for the US dollar. Gold prices often benefit when there is a substantial reduction in the market for the US dollar.
On the contrary, a decrease in the unemployment rate through new job creation favours the US dollar and weakens gold. Thus, more investors come in when there is an improvement in job creation.
The forecast for this data is the same as the previous reading given as 3.6%. A reduction in this number is not suitable for gold. It can only favour the US dollar and weaken gold.
Similarly, the forecast for the Non-Farm employment change is given as 250K. The previous reading for this data was 372K. An increase in this data is good for the US dollar and will mean a negative for gold. Only a reduction in the given forecast above will favour gold prices so much today.
Investors hope to increase US unemployment after the US inflation rate rose to 9.1% in June, marking its highest point in forty years. This will boost the gold price to break its current resistance at $1800.
Chances that the unemployment rate may not be affected so much will favour the US dollar if it is the case.
Either way, significant volatility is expected for XAUUSD in the market today. Investors are advised to manage their risk correctly to increase their profits.