Ahead of US NFP: Gold edges lower as bond yields rebound and Fed hike bets bolster USD

• Recovering US bond yields lift the USD, putting Gold under fresh selling pressure.
• With higher oil prices fuelling inflation concerns, Fed rate-hike expectations add to pressure on the metal.
• The US NFP release is the next focus for traders seeking a meaningful market catalyst.

$4,100 proved difficult for Gold (XAU/USD) to hold above. Fresh selling emerged during Friday's Asian session after the metal failed to establish itself above that level, extending the previous day's pullback from a two-week high. A modest recovery in US bond yields from a recent two-month low is helping the US Dollar (USD) extend its rebound from the lowest level since late September, reached on Thursday. The stronger dollar is seen as a drag on the precious metal. Losses nevertheless appear limited, as traders may avoid aggressive directional positions before the crucial US monthly employment figures.

65K new jobs are expected in October's US Nonfarm Payrolls (NFP) report, compared with the previous month's weaker 29K reading. Forecasts put the unemployment rate unchanged at 4.2%. Investors will also scrutinise Average Hourly Earnings, given the potential for wage pressures to shape Federal Reserve (Fed) policy expectations materially. These closely followed economic releases are set to generate financial-market volatility and influence demand for the USD, giving gold a meaningful catalyst.

Concerns that artificial intelligence development could slow followed a Democratic sweep in the US midterm elections. Wall Street suffered a heavy sell-off on Thursday as a result, driving demand for traditional safe havens such as US government Treasuries. Inflation worries resurfaced, however, after crude oil prices rebounded sharply overnight. Markets also continue to price in around a 70% probability of another increase in borrowing costs at the US central bank's December meeting. Together, these factors are prompting a modest recovery in US bond yields after their midweek slump and lending support to the dollar.

Uncertainty surrounding US President Donald Trump's next steps is also keeping the geopolitical risk premium in place. On Thursday, Trump said the US might have to destroy the rest of Iran, adding that people would know soon enough if he acted. Differences between the US and Iran over Tehran's nuclear programme and the Strait of Hormuz remain unresolved. This gives the safe-haven dollar further support and is seen as weighing on the Gold price. Even so, the metal remains comfortably above the psychological $4,000 level and appears on course for its first weekly gain in three weeks.

4-hour chart: XAU/USD

Technical Outlook

Above the Fibonacci cluster spanning the 50.0% retracement at $4,006 and the 38.2% level at $4,039, the near-term outlook for XAU/USD remains constructive. Bulls should nonetheless be cautious after an intraday drop below the 100-period Exponential Moving Average (EMA) on the 4-hour chart. At 52.40, the Relative Strength Index (RSI) has retreated from overbought territory, signalling momentum that is neutral to mildly positive. The Moving Average Convergence Divergence (MACD) indicator, however, remains positive. Its line is above zero, while earlier histogram gains suggest bullish pressure is pausing rather than reversing.

Further selling below the 38.2% Fibonacci retracement at $4,039 would therefore be required to strengthen the case for a decline towards deeper support at the 50.0% retracement near $4,006. Below those levels, attention would shift to the 61.8% retracement at $3,973, followed by the 78.6% level at $3,926. Initial resistance sits at the 23.6% retracement at $4,080. A sustained break higher would clear a path towards the recent cycle peak of $4,146.

(The technical analysis of this story was written with the help of an AI tool. Know more.)