Gold Price Forecast: XAU/USD consolidates above $1,900, eyes US NFP for fresh impetus

• Gold price oscillates in a narrow trading band just above the weekly low touched on Thursday.
• Bets for more rate hikes by the Federal Reserve underpin the US Dollar and act as a headwind.
• Investors now look to the release of the key US NFP report before placing fresh directional bets.

Gold price struggles to capitalize on the overnight modest bounce from the vicinity of the $1,900 mark, or the weekly low and remains on the defensive through the Asian session on Friday. The XAU/USD currently trades around the $1,910 area, nearly unchanged for the day, and seems vulnerable to prolong over a two-month-old downtrend from the all-time high touched in May.

Hawkish Federal Reserve expectations act as a headwind for Gold price

Firming expectations that the Federal Reserve (Fed) will hike interest rates again, by 25 basis points (bps) at its upcoming policy meeting on July 25-26 continue to act as a headwind for the non-yielding Gold price. The bets were reaffirmed after the data published by Automatic Data Processing (ADP) on Thursday showed that private-sector employers in the United States (US) added nearly 500K jobs in June. The reading marked the largest one-month increase since February 2022 and smashed estimates for an increase of 228K by a big margin. Separately, the Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers' Index (PMI) (also known as the ISM Services PMI) rose from 50.3 to 53.9 in June, above expectation of 51.

This, to a larger extent, overshadowed data showing Weekly Initial Jobless Claims rose more than anticipated last week and JOLTS Job Opening for May missed consensus estimates. In fact, the US Department of Labor (DOL) reported that there were 248K initial jobless claims during the week that ended on July 1 as compared to the previous week's print of 236K (revised from 239K) and slightly higher than the market expectation of 245K. Furthermore, the US Bureau of Labor Statistics' (BLS) Job Openings and Labor Turnover Survey (JOLTS) data revealed that the number of job openings on the last business day of May stood at 9.8 million against the 9.93 million anticipated and 10.3 million openings in April (revised from 10.1 million).

Elevated US bond yields lends support to USD and also undermine XAU/USD

Nevertheless, the data pointed to a resilient US economy and supports prospects for a further policy tightening by the Fed. This, in turn, pushes the US Treasury bond yields sharply higher and acts as a tailwind for the US Dollar (USD), which is seen as another factor weighing on the US Dollar-denominated Gold price. The downside, however, remains cushioned as traders now seem to have moved to the sidelines ahead of the release of the US monthly employment details. The popularly known Nonfarm Payrolls (NFP) report is due later during the early North American session and might influence expectations about the Fed's rate-hike path. This, in turn, will drive the USD demand and provide a fresh impetus to the XAU/USD.

Gold price technical outlook

From a technical perspective, the overnight swing low, just ahead of the $1,900 mark, might continue to act as an immediate support ahead of the $1,893-$1,892 region or the multi-month low touched last week. A convincing break below the latter will make the Gold price vulnerable to accelerate the downward trajectory towards the very important 200-day Simple Moving Average (SMA), currently around the $1,865-$1,864 region.

On the flip side, the $1,918-$1,919 area now seems to act as an immediate hurdle. This is closely followed by the $1,925-$1,926 region, above which the Gold price could climb back to the 100-day Simple Moving Average (SMA), currently around the $1,947 zone. A sustained strength beyond the latter might trigger a short-covering rally and lift the Gold price to the $1,962-$1,964 area en route to the $1,970-$1,972 supply zone. Some follow-through buying should allow bulls to reclaim the $2,000 psychological mark and test the $2,010-$2,012 resistance.

Key levels to watch