Gold price pauses rally amid heightened investor caution ahead of US Nonfarm Payrolls

• Gold price turns sideways near all-time highs as focus shifts to the US NFP report.
• The US Dollar rises as Fed Kashkari said he sees no rate cuts if inflation remains stubborn.
• Escalating Middle East tensions keep safe-haven bids strong.

Gold price’s (XAU/USD) rally pauses after refreshing all-time highs near $2,305 amid uncertainty ahead of the release of the United States Nonfarm Payrolls (NFP) data for March. The labor market data is expected to influence market expectations for the Federal Reserve (Fed) rate cuts, which financial markets are currently anticipating for June.

The CME FedWatch Tool shows that traders are pricing in a 61% chance that the Fed will trim interest rates in June, an inch higher from 60% a week ago. Traders bets for Fed rate cuts remain broadly unchanged as surprisingly weak US Services PMI for March offset the negative impact of hawkish commentary from a slew of Fed policymakers. Meanwhile, 10-year US Treasury yields are up at 4.34%.

Surprisingly, the Services PMI fell to 51.4 in March, from expectations of 52.7, and the former reading was 52.6. 

Meanwhile, the near-term appeal of Gold remains strong due to escalating Middle East tensions. Air strikes from Israeli forces on the Iranian embassy in Damascus, situated near Syria’s capital, have deepened fears of Iran’s participation in the Israel-Palestine war. Rising geopolitical tensions lead investors towards safe-haven assets such as Gold.

Daily digest market movers: Gold price awaits US NFP for fresh guidance

• Gold price takes a breather as investors turn cautious ahead of the United States NFP report for March, which will be published at 12:30 GMT. It is anticipated that the United States employers recruited 200K jobs, lower than the robust hiring of 275K seen in February. The Unemployment Rate is anticipated to remain unchanged at 3.9%. 
• Investors will also focus on March's Average Hourly Earnings data to gain more insights about the inflation outlook. Economists expect monthly wage growth to have grown at a higher pace of 0.3% from 0.1% in February. Annual wage growth is forecasted to have grown by 4.1%, decelerating from the prior reading of 4.3%. 
• Higher wage growth could slow the progress in inflation declining towards 2%, which could negatively influence market expectations for the Federal Reserve (Fed) to begin reducing interest rates in June. If this happens, the opportunity cost of holding an investment in non-yielding assets such as Gold will increase, weighing on its price. On the contrary, slowing wage growth will strengthen Gold’s appeal.
• Meanwhile, the stabilization in the US Dollar’s valuation after the Fed’s hawkish guidance on interest rates has also put slight pressure on the Gold price. The US Dollar Index (DXY) finds support from a two-week low of 103.90 after Minneapolis Fed Bank President Neel Kashkari said rate cuts won’t be required this year if inflation stalls. 
• Kashkari said he forecasted two rate cuts by 2024 in the latest Fed dot plot. “The Fed needs to keep interest rates higher in the range of 5.25%-5.50% if inflation remains stronger than hoped,” Kashkari warned. He added that if that still did not work, further rate increases are not off the table, but they are also not a likely scenario given what we know right now," Reuters reports.

Technical Analysis: Gold price trades near all-time highs around $2,300

Gold price falls slightly after achieving the $2,300 milestone. The near-term demand remains unabated as all short-to-long term Exponential Moving Averages (EMAs) are sloping higher. On the downside, March 21 high at $2,223 will be a major support area for the Gold price bulls.

The 14-period Relative Strength Index (RSI) near 80.00 indicates that a bullish momentum is still active. However, overbought signals have emerged.