Near $4,100: Gold advances ahead of US NFP data

$4,085 is the level Gold approaches in early Asian trading on Friday.
A softer US Dollar and cheaper oil support Gold as inflation worries recede.
Friday’s focus turns to the US employment report for September.

$4,085 marks a more than two-week high for Gold (XAU/USD). The metal surges towards that level in Friday’s early Asian session as the US Dollar (USD) weakens and oil prices fall. Due later on Friday, the US September employment report will be closely watched for signals on interest rate policy.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Following the Democrats’ sweep of the US midterm elections, the precious metal builds on its gains. Oil prices dropped sharply after Democrats swept Congress, as speculation grew that the election would hasten an end to the Iran war. Investors also scaled back bets on interest rate increases by the US Federal Reserve (Fed).

David Meger, director of metals trading at High Ridge Futures, said: “It’s not that at this point rate hike expectation has completely disappeared,” adding: “As we’ve seen the weaker energy prices, there’s an expectation that we will see some fears of inflation subside and the potential for a lesser need for rate hikes ‌down the road,”

According to CME’s FedWatch tool, market pricing now implies nearly a 70.9% chance of a Fed rate increase in December. Holding non-yielding gold carries a greater opportunity cost when interest rates rise.

Friday’s US employment figures could shed light on the central bank’s policy path. Forecasts point to 65,000 jobs added in September in the Nonfarm Payrolls (NFP) report, alongside an unchanged Unemployment Rate of 4.2% for the same period. Evidence of a stronger US labour market could support the Greenback, putting near-term pressure on the USD-denominated commodity.

3% gold rebound as weaker USD and lower yields support precious metals

Following the US midterm vote, OCBC strategists observe that "precious metals rebounded sharply following the US midterm elections, supported by a softer USD, lower US Treasury yields and oil prices as markets reassessed the implications of political gridlock for US fiscal policy and growth." Their assessment highlights that "gold rallied around 3%, reclaiming the 4000 level," as expectations that political gridlock may limit fiscal expansion and dampen US growth offered "some relief to yields," while "slippage in oil prices also lent support."

In OCBC’s assessment, "encouragingly, gold has started to respond more positively to a favourable macro backdrop, following its earlier reluctance to benefit from lower yields and USD weakness." Although the bank remains "cautiously optimistic that gold may be finding its footing," it cautions that "further gains would likely require some moderation in Fed tightening expectations and continued recovery in investment demand." Its strategists say they "continue to monitor real yields, USD direction, oil prices and ETF flows for signs of sustained buying interest," identifying "Friday’s US payrolls" as "another important test."

100-day SMA caps Gold: Technical Analysis

On the daily chart, spot XAU/USD trades below its 100-day simple moving average (SMA), leaving the near-term upside constrained. The price is holding just above the 20-day Bollinger middle band. Together, these readings point to a corrective phase within a broader high-price environment. At 49.63, the Relative Strength Index (RSI) indicates neutral to mildly positive momentum, insufficient so far to test the principal overhead trend barrier.

The 100-day SMA at $4,200 provides the first resistance level. A break above it would bring the upper Bollinger band near $4,250 into view as the next obstacle. Support starts at the 20-day Bollinger middle band around $4,070, followed by the lower Bollinger band near $3,895. A decisive move below that lower level would likely intensify short-term bearish pressure.

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

Gold: Frequently asked questions

Gold investment: What attracts investors?

Widely used to preserve wealth and facilitate exchange, Gold has held an important place throughout human history. Beyond its lustre and use in jewellery, the metal is now broadly regarded as a safe-haven asset, or an investment considered attractive during unsettled periods. Because it is not dependent on a particular issuer or government, Gold is also commonly viewed as protection against inflation and currency depreciation.

Gold demand: Who are the largest buyers?

Central banks hold more Gold than any other group. To support their currencies during turbulent periods, they typically diversify reserves and purchase Gold, reinforcing perceptions of economic and currency strength. Substantial Gold reserves can underpin confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes of Gold in 2022, worth around $70 billion. That represents the largest annual purchase on record. Emerging-economy central banks, including those of China, India and Turkey, are rapidly expanding their Gold holdings.

Gold correlations: How do other assets interact?

The US Dollar and US Treasuries, both leading reserve and safe-haven assets, generally have an inverse relationship with Gold. Dollar weakness typically supports Gold, allowing investors and central banks to diversify their holdings during turbulent periods. Risk assets also tend to move in the opposite direction to Gold. Rising equity markets usually weigh on the metal, whereas selling in riskier markets tends to support it.

Gold prices: What are the main drivers?

Numerous factors influence Gold prices. Its safe-haven appeal means geopolitical instability or concerns about a severe recession can trigger rapid gains. Lower interest rates generally support this non-yielding asset, while a higher cost of borrowing typically puts it under pressure. Nevertheless, movements in the US Dollar (USD) drive most price changes because Gold is denominated in dollars (XAU/USD). A stronger Dollar tends to restrain Gold prices; a softer Dollar is more likely to lift them.