Gold price clings to gains on Fed rate-cut hopes, US NFP in focus

• Gold price holds to gains as investors price in rate cuts by the Fed in May.
• The US Dollar has come under pressure ahead of the US NFP data.
• Fed officials need more evidence that inflation is declining towards 2%.

Gold price (XAU/USD) aims for a strong weekly gain as investors choose the early rate-cut narrative in the US, shrugging off recent doubts over its timing. In the monetary policy statement, the Federal Reserve (Fed)  didn’t explicitly refer to upcoming rate cuts amid the absence of enough evidence that underlying inflation will sustainably return to the 2% target. However, policymakers already signaled in the bank’s latest Summary of Economic Projections (SEP)  that interest rates will be reduced by 75 basis points (bps) in 2024. 

Gold price could experience volatility ahead as the United States Bureau of Labor Statistics (BLS) will report the Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT. Investors anticipate that labor demand moderated and wage growth slowed as the Fed has maintained interest rates at restricted levels for long.

Daily digest market movers: Gold clings to gains ahead of US labor market data

• Gold price holds onto gains above the crucial resistance of $2,050 as the US Dollar has come under pressure ahead of the United States official Employment data for January.
• The US ADP Employment Change data, released on Wednesday, showed a sharp decline in private payrolls at 107K against the consensus of 145K. This has set a negative undertone for the NFP data.
• According to the estimates, 180K workers were hired by US employers against 216K fresh payrolls added in December. The Unemployment Rate is seen rising to 3.8% against the former reading of 3.7%.
• Investors will focus on the wage growth data, as it will provide fresh outlook on the consumer price inflation. Monthly Average Hourly Earnings are expected to have grown at a slower pace of 0.3% against the 0.4% increase in December. Annual wage growth is expected to increase at a steady pace of 4.1%.
• An upbeat wage growth data would accelerate fears of sticky price pressures, which could further dampen hopes of rate cuts by the Federal Reserve in March. 
• As per CME Group Fedwatch tool, traders see more than 61% chances for a 25 bps rate-cut in May to 5.00%-5.25%.
• Expectations for the first rate cut by the Fed after a two-year long rate-tightening campaign have shifted from March to May. In his last press conference, Fed Chair Jerome Powell said a dovish decision in the March meeting is unlikely as the central bank won’t get confident about inflation declining to the 2% target by then.
• Economic indicators such as robust consumer spending, a lower jobless rate, and a recovery in factory data could cast doubts among Fed policymakers about price stability. .
• The US ISM reported on Thursday that the Manufacturing PMI for January rose sharply to 49.1 against expectations of 47.0 and the former reading of 47.1. Still, the PMI remained below the 50.0 threshold. The New Orders Index rose significantly to 52.5 vs. 47.0 in December. A robust factory order book indicates an improvement in demand.

Technical Analysis: Gold price aims to continue four-day winning spell

Gold price consolidates in a tight range above $2,050 as investors await the US NFP data for fresh guidance. The precious metal struggles to continue its four-day winning streak. The near-term appeal for the yellow metal is upbeat as it has delivered a breakout of the Symmetrical Triangle chart pattern formed on a daily timeframe. Gold price has also printed a higher high near $2,065, which indicates that the overall trend has turned bullish.

The 20-day Exponential Moving Average (EMA) near $2,035 continues to support the bulls. The 14-period Relative Strength Index (RSI) aims to break above the 60.00 hurdle. A bullish momentum would activate if the oscillator manages to do so.