Gold (XAU/USD) edged sideways below the $4,200 mark during the first half of the European session on Friday, as market participants held fire ahead of the US employment report. The Nonfarm Payrolls (NFP) release, due later in the day, is expected to show the economy added 90,000 jobs in September, down from 162,000 in the prior month. The Unemployment Rate is forecast to remain at 4.1%, while annual wage inflation as measured by Average Hourly Earnings will also be closely watched.
Employment data and Fed rate expectations
The jobs report is the most significant economic indicator for forex traders and is closely monitored by Federal Reserve policymakers. A weaker-than-expected reading could reduce the likelihood of further rate hikes after the widely anticipated quarter-point increase at the September meeting. Several FOMC members have recently indicated they see no urgent need for an immediate follow-up increase. The wage data will provide additional clues on inflation pressures from the labour market, which in turn influences the Fed’s policy path. The US Dollar (USD) is likely to react to the overall package of data, and any move in the dollar will affect the non-yielding gold price.
On Thursday, the Institute for Supply Management (ISM) reported that US manufacturing activity expanded for the ninth consecutive month in September. Raw material prices rose for a 24th straight month, adding to inflationary concerns that stem also from volatile energy costs. These factors underpin the case for further tightening by the Fed and helped limit the overnight pullback in US bond yields from multi-year highs.
Geopolitical tensions and USD strength
The ongoing standoff between the US and Iran continues to support the US Dollar and acts as a headwind for gold. According to a Wall Street Journal report, the Pentagon may send a third aircraft carrier strike group along with 10,000 sailors and Marines to the Persian Gulf. Separately, Iran’s Persian Gulf Strait Authority said several tankers had been attacked in the Strait of Hormuz in recent days. US President Donald Trump stated on Wednesday that he would decide very soon whether to “blow up Iran” and added that the war would end very soon “one way or the other.” These developments keep the geopolitical risk premium firmly in play and favour USD bulls, warranting caution for gold buyers.
Technical picture: key levels to watch
On the 4-hour chart, XAU/USD maintains a bearish near-term tone below the 200-period Simple Moving Average (SMA) and mid-range Fibonacci retracements. The Moving Average Convergence Divergence (MACD) indicator remains in positive territory with the line above its signal line and a still-constructive histogram. The Relative Strength Index (RSI) near 43 suggests a potential pause in the downside rather than a clear bullish reversal.
Any move above $4,200 is likely to face immediate resistance near the 61.8% Fibonacci retracement at $4,230. The 50% level at $4,319 forms the next topside barrier, ahead of the 200-period SMA at $4,386 and the 38.2% retracement at $4,408. A dense supply zone extends from there, with the 23.6% retracement at $4,519 marking a more distant cap that would need to be reclaimed to challenge the current bearish bias. On the downside, initial support is seen at the 78.6% Fibonacci retracement at $4,103, ahead of the prior swing low near $3,942.
Key takeaways
- Gold trades in a narrow range below $4,200 ahead of the US NFP report.
- The NFP is expected to show 90,000 jobs added in September, down from 162,000.
- Geopolitical tensions between the US and Iran support the US Dollar and limit gold’s upside.
- Technical indicators suggest a bearish bias below $4,200, with resistance at $4,230 and support at $4,103.
Common questions
What is the Nonfarm Payrolls report?
The Nonfarm Payrolls (NFP) report, released monthly by the US Bureau of Labor Statistics, measures the number of new jobs created in the US in all non-agricultural businesses. It is considered the most important economic indicator for forex traders because it correlates closely with overall economic performance and is monitored by Federal Reserve policymakers.
How does the NFP report affect gold prices?
The NFP data influences the US Dollar and expectations for Federal Reserve policy. A stronger-than-expected reading tends to boost the dollar and weigh on gold, while a weaker reading can weaken the dollar and support gold. However, the market’s reaction depends on how traders assess the entire report, including revisions to previous months and the unemployment rate.
For the latest price action, check the live gold price.