With US NFP data due, gold climbs to near $4,100

Gold advances towards $4,085 as Friday’s early Asian trading gets under way.
Gold draws support as a softer US Dollar and cheaper oil temper inflation worries.
Friday’s US employment report for September will be the key focus for markets.

Gold (XAU/USD) rallies to its highest level in more than two weeks, trading near $4,085 in Friday’s early Asian session as a softer US Dollar (USD) and declining oil prices provide support. For signals on the interest-rate outlook, traders will scrutinise the US September employment report, scheduled for release later on Friday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Following the Democrats’ sweep of the US midterm elections, the precious metal has continued its advance. Their sweep of Congress triggered a sharp fall in oil as speculation grew that the election would hasten an end to the Iran war. Investors also scaled back wagers on rate increases by the US Federal Reserve (Fed).

David Meger, director of metals trading at High Ridge Futures, said: “It’s not that at this point rate hike expectation has completely disappeared,” adding: “As we’ve seen the weaker energy prices, there’s an expectation that we will see some fears of inflation subside and the potential for a lesser need for rate hikes ‌down the road,”

According to CME’s FedWatch tool, traders currently assign a probability of nearly 70.9% to a December rate increase by the Fed. Holding gold, which offers no yield, becomes more costly in opportunity-cost terms when interest rates rise.

Friday’s US labour market figures could help clarify the central bank’s policy path. Forecasts point to an increase of 65,000 in September Nonfarm Payrolls (NFP), alongside an unchanged Unemployment Rate of 4.2% for the same month. Evidence of a stronger US labour market could support the Greenback, putting near-term pressure on the dollar-denominated commodity.

Can a softer USD and lower yields sustain support for Gold and precious metals?

According to OCBC strategists, "precious metals rebounded sharply following the US midterm elections, supported by a softer USD, lower US Treasury yields and oil prices as markets reassessed the implications of political gridlock for US fiscal policy and growth." The strategists point out that "gold rallied around 3%, reclaiming the 4000 level," as expectations that political gridlock may limit fiscal expansion and dampen US growth offered "some relief to yields," while "slippage in oil prices also lent support."

In OCBC’s assessment, "encouragingly, gold has started to respond more positively to a favourable macro backdrop, following its earlier reluctance to benefit from lower yields and USD weakness." Although the bank remains "cautiously optimistic that gold may be finding its footing," it cautions that "further gains would likely require some moderation in Fed tightening expectations and continued recovery in investment demand." For evidence of lasting buying interest, the strategists say they "continue to monitor real yields, USD direction, oil prices and ETF flows for signs of sustained buying interest," identifying "Friday’s US payrolls" as "another important test."

Technical Analysis: Can Gold overcome the 100-day SMA barrier?

The daily chart shows that XAU/USD still faces a near-term ceiling: spot prices remain beneath the 100-day simple moving average (SMA), though they are holding just above the 20-day Bollinger middle band. The pattern points to a correction within a broader environment of elevated prices. At 49.63, the Relative Strength Index (RSI) indicates neutral to mildly positive momentum, which has not yet tested the main trend barrier overhead.

A move higher would first encounter resistance at the 100-day SMA of $4,200. If buyers break above it, the upper Bollinger band near $4,250 would present the next obstacle. Immediate downside support lies around $4,070 at the 20-day Bollinger middle band, followed by a stronger cushion near $3,895 at the lower Bollinger band. A decisive fall below that level would likely intensify short-term bearish pressure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold: frequently asked questions

What makes Gold an investment choice?

Widely used both to preserve wealth and to facilitate exchange, Gold has held an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now commonly regarded as a safe-haven asset, or an investment considered attractive during periods of turmoil. Because it is not dependent on any particular issuer or government, Gold is also widely viewed as protection against inflation and currency depreciation.

Which buyers hold the largest amounts of Gold?

The largest holders of Gold are central banks. To underpin their currencies during unsettled periods, they generally diversify their reserves and purchase Gold, helping reinforce perceptions of economic and currency strength. Substantial Gold reserves can bolster confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes of Gold, valued at around $70 billion, in 2022. No other year since records began has seen purchases on that scale. Emerging-economy central banks, including those in China, India and Turkey, are rapidly building up their Gold holdings.

How does Gold move in relation to other assets?

Both the US Dollar and US Treasuries are leading reserve and safe-haven assets, and Gold tends to move inversely to them. A decline in the Dollar typically supports Gold, allowing central banks and investors to diversify their holdings during turbulent periods. Risk assets also have an inverse relationship with Gold. Rising equity markets generally put pressure on Gold prices, whereas selling in riskier markets usually benefits the precious metal.

Which factors drive Gold prices?

A broad range of influences can drive price changes. Gold’s safe-haven appeal means that geopolitical turmoil or concerns over a severe recession can rapidly lift its price. Since it pays no yield, Gold generally benefits from falling interest rates, while a higher cost of borrowing typically puts pressure on the yellow metal. Nevertheless, movements in the US Dollar (USD) account for most price changes because Gold is quoted in dollars (XAU/USD). Dollar strength usually restrains Gold prices; a softer Dollar, by contrast, is likely to lift them.