The precious metal gold has attempted to recover from its August low of $1688.90. XAUUSD prices have rebounded from this level and stayed above their support level at $1696.88 during the Asian session today. It was trading around $1700 ahead of the NFP report today.
The dollar index's (USDX) strength, which had remained above 109 all week, has been one of the essential factors keeping the price of gold down.
The expected decline in the Non-Farm Payroll report to be delivered today, which might weaken the US dollar, has been the major factor driving a short-term bullish movement for gold again.
However, the present bullish movement does not seem sustainable as other available data points to healthier growth in the US economy, which could result in a more remarkable employment change in the NFP report to be delivered today.
Some of the data supporting the rising dollar index, which has kept gold prices down to this point, include the US JOLTS job openings, which increased to 11.24M from 11.04M in the previous year and 10.37M in the forecast. Next is the US jobless claims data, which was reduced massively to 232K against the estimates of 250K and the previous record of 237K.
Added to this, the US Conference Board (CB) Consumer Confidence rose to 103.2, against the forecast of 97.6 and the previous record of 95.3. Equally important is the US ISM Manufacturing PMI, which stayed above the forecast of 52.1 and maintained its previous figure of 52.8.
All these factors together have helped strengthen the dollar index all week and kept gold prices from recovering yet.
Consequently, there are greater expectations for an improvement in the US NFP report to be delivered today.
The NFP report is critical economic data that measures the number of employed people in the US, excluding the farm industry. This report is usually used to measure the economic health of the country. The NFP report usually captures the jobs-added data and the unemployment rate. These two data releases, released every first Friday of the month, always affect the dollar index. An increase in the non-farm payroll data means the US economy is growing and forces the dollar index. Meanwhile, a reduction in the unemployment rate would support the dollar index.
The forecast for the non-farm payroll has been at 295K, with the previous record at 528K.
The unemployment rate has been forecasted to remain the same at 3.5%.
These reports will determine the direction of gold prices for the rest of the month.
Most investors hope for a more positive outlook from the NFP report today. Analysts at Goldman Sachs seemed to have championed this course, predicting at least a 300K increase in the August NFP, foreseeing a massive return of workers into the labour market, and expecting the unemployment rate to remain at 3.5%.
Investors are very interested in the outcome of the NFP report as the data from it will largely influence the Fed's decisions during their forthcoming session this month.
Despite the hawkish stance maintained by Fed Chair Jerome Powell during his speech at the Jackson Hole Symposium last week, he claimed that the Committee would first watch the data on the ground and the general outlook of the economy before taking decisions on the rate of an interest rate hike to embark on during their meeting this month. Here, the NFP readily comes to the forefront as one of the critical data points to be considered by the Fed before deciding on the interest rate hike in September.
How will the NFP Report affect gold prices today?
The Non-Farm Payroll (NFP) report is a well-known economic data point that causes volatility for gold. The direction for XAUUSD movements after this report depends on its outcome.
The NFP report states the employment change within the past month, excluding the farm industry. It also gives the unemployment rate statistics an update. This helps in measuring the economic progress made so far in the past month.
A decrease in the unemployment rate from the NFP report often triggers a positive for the US dollar. This will cause a bear market for gold.
On the contrary, a reduction in NFP and an increase in the unemployment rate will weaken the US dollar and cause bullishness for gold. This means we can expect a recovery for gold should the NFP report disappoint today.
Gold price forecast ahead of NFP report
There is now low buying volume, which has kept the price ranging throughout the Asian session today. A break above the $1,700 level will attract more buyers up to $1,710. If the bullish trend continues, the next significant resistance level above this level is $1,724.
On the contrary, should the price fail to break above the psychological resistance of $1,710, we can expect more downside with a target of $1,694.60. A break below this level could lead to a retest of the previous low at $1,688.90.
In all, substantial volatility will be expected from gold today based on the outcome of the NFP report. Due to high market volatility, investors must apply proper risk management to protect their positions from excessive loss.