Gold Price Forecast: XAU/USD declined to $1,940 ahead of US NFP

• XAU/USD traded with mild losses on Thursday, near the $1,940 area.
• Lower US yields limit the yellow metal´s downside potential.
• Strong NFP on Friday may give US yields a boost.

On Thursday, Gold price slightly decreased as the recovery of the USD limited the upside potential. The Greenback found demand as people filing first-time claims for state unemployment insurance decreased at the end of August, while the Personal Consumption Expenditures inflation figures increased, just as expected. Markets are cautious ahead of critical Nonfarm Payrolls (NFPs) from August that will be released on Friday.

From the data side, the US Department of Labor released robust figures for Initial Jobless Claims from August that came in at 228,000, versus the expected 235,000 and the previous reading of 232,000, while the Core Personal Consumption Expenditures (PCE)(YoY) from July came in as expected at 4.2% but slightly lower than the last 4.1%.

That said, the US dollar, measured by the DXY index, showed more than 0.40% of daily gains while the US treasury bond yields, often seen as the opportunity cost of holding non-yielding metals, decreased. The 2-, 5- and 10-year yields declined to 4.86%, 4.24% and 4.08%, respectively, limiting the XAU/USD downside. The focus now shifts to the August Nonfarm Payrolls, where investors will watch for further clues about the following interest rate decisions by the Federal Reserve (Fed). As for now, the CME FedWatch Tool suggests that investors expect the Fed won't hike on September 20, while the odds of 25 basis points (bps) stand at 40% on November 1 and December 13. It's worth highlighting that Chair Powell from the Fed stated that the bank is expecting the US labour market to soften and that ongoing decisions will be "carefully" decided, so the outcomes of the NFP will likely dictate the pace of the mentioned expectations and the US Treasury yields on Friday.

XAU/USD Levels to watch

According to the daily chart, the XAU/USD trades neutral to bearish in the short term, near the $1,940 area. The Relative Strength Index (RSI) trades flat, while the Moving Average Convergence Divergence (MACD) continues to print strong green bars, suggesting that the buyers are resilient. On the general outlook, the XAU/USD trades above the 20-and 200-day Simple Moving Average (SMA) and is approaching the 100-day SMA, indicating that the bulls are looking to take charge.

Resistance levels: $1,945, $1,954 (100-day SMA), $1,970
Support levels: $1,935, $1,915 (20- and 200-day convergence), $1,900.

 

XAU/USD Daily chart