Gold price hovers around $2,040 amid market caution ahead of US Nonfarm Payrolls data

• Gold price faces pressure as investors focus on US labor market data.
• The Unemployment Rate is expected to remain within the Fed’s long-term projection of 3.8%.
• Robust US economic prospects may trim prospects of a Fed rate cut in March.

Gold price (XAU/USD) oscillates in a tight range around $2,040 as investors await the United States Nonfarm Payrolls (NFP) data for fresh cues. Other employment-related economic indicators such as ADP Employment Change and weekly jobless claims data, released on Thursday, outperformed expectations and have set a higher base for the official employment data. Market participants still anticipate moderate job gains, below 200K, as the pace of frequent job change by individuals has slowed due to easing labor demand.

Market participants have turned cautious about near-term demand for bullions as prospects in favour of rate cuts by the Federal Reserve (Fed) from March are gradually unwinding. Unlike other members of the Group of Seven economies that are struggling with high interest rates, the US economy is performing well on all parameters. This strength could allow the Fed to leave interest-rate cuts for the second quarter of this year.

Daily Digest Market Movers: Gold price remains sideways ahead of US NFP data

• Gold price trades back and forth slightly above $2,040 as investors await the United States official Employment data for December, which will be published at 13:30 GMT.
• US employers are expected to have hired 170K individuals against 199K in November. The Unemployment Rate is seen slightly higher at 3.8% vs. 3.7% recorded earlier, which is in-line with Federal Reserve’s projection for this year.
• Investors will keenly focus on the Average Hourly Earnings data, which has been a key catalyst to higher price pressures in the US economy. These are forecast to grow at a slower pace of 0.3% after rising 0.4% in November. Annual wage data is estimated to have softened slightly to 3.9% from prior growth of 4.0%.
• Soft labor demand and easing price pressure would elevate prospects of a dovish interest rate decision by the Fed from March. If the economic data turns out hotter-than-projected, Fed policymakers will get an argument in favour of keeping interest rates high for a longer period.
• As per the CME FedWatch tool, chances of an interest rate cut in March have dropped to 62.5%.
• Market participants are reconsidering bets supporting a rate-cut campaign from March as robust economic prospects for the US economy could imbed inflationary pressures above 2%.
• This week, the US ISM reported a strong rebound in Manufacturing PMI as firms remain optimistic about lower borrowing costs this year.
• Apart from the US NFP report, investors will focus on the ISM Services PMI, which will be published at 15:00 GMT. The Services PMI represents the service sector, which accounts for two-third of the US economy. It is seen slightly down at 52.6 against November’s reading of 52.7.
• Meanwhile, the US Dollar Index has printed a fresh three-week high near 102.80 as investor risk-appetite is easing swiftly. 10-year US Treasury Bond yields have climbed above 4% amid a cautious market mood.

Technical Analysis: Gold price trades inside previous day’s trading range

Gold price remains subdued in the European session as investors turn anxious ahead of the US labor market data. The downside in the precious metal seems restricted for now as the 20-day Exponential Moving Average (EMA) around $2,040 will continue to provide a cushion while the upside seems capped amid fading appeal for non-yielding assets.

The yellow metal trades inside Thursday’s trading range but a volatile action is highly anticipated after the release of the US economic data.