Gold is battling a critical resistance just under the $4,500 threshold early Friday, having closed well above the $4,450 barrier on Wednesday. The next big in Gold now hinges on the US Nonfarm Payrolls (NFP) data and the Supreme Court ruling on President Donald Trump’s tariff powers.
Gold braces for a big day ahead
Gold tends to benefit in a low-interest-rate environment, and with the US Federal Reserve (Fed) projected to cut rates by a total of nearly 60 basis points (bps) this year, the US labor market data holds utmost significance for the central bank’s easing outlook.
Economists expect the NFP to rise by 60,000 in December after reporting a 64,000 gain in November, while the Unemployment Rate is likely to tick down to 4.5% in the same period from 4.6% prior. The Average Hourly Earnings, a closely watched measure of wage inflation, is seen edging higher by 3.6% over the year in December versus 3.5% in November.
In case the headline NFP and Unemployment prints come in better than the market expectations, the US Dollar will likely build on its bullish momentum amid receding bets of two Fed rate cuts this year, smashing Gold back toward the $4,300 level.
Contrarily, Gold could rebound toward record highs of $4,550 on a weaker-than-expected NFP figure of below 50,000 and an unexpected rise in the Unemployment Rate. Disappointing data would double down on dovish Fed expectations, reviving the USD selling bias.
Alongside the US jobs data, the Supreme Court decision on President Donald Trump’s use of emergency tariff powers could also significantly impact the USD’s valuation and Gold price action.
“The ruling would determine whether Trump can invoke the International Emergency Economic Powers Act (IEEPA) to impose tariffs without congressional approval, potentially upending US trade policy and throwing months of negotiations into disarray,” according to Reuters.
Meanwhile, growing geopolitical tensions between the US and North Atlantic Treaty Organization (NATO) members and also China and Japan over rare earth trade row could keep the haven demand intact for the bright metal, limiting its downside.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,471.03. The 21-day Simple Moving Average (SMA) climbs above the 50-, 100- and 200-day SMAs, all rising, while price holds above these dynamic supports. The 21-day SMA stands at $4,387.02 and offers initial support. The Relative Strength Index (RSI) sits at 62.39, indicating firm bullish momentum.
A descending trend line from $4,559.97 limits gains, with resistance seen near $4,490. A daily close above that barrier could extend the advance toward the line’s origin, while failure to clear it would keep the bias supported by the 50-day SMA at $4,231.51, with the 100-day at $4,019.88 and the 200-day at $3,666.82 underpinning the broader trend.
(The technical analysis of this story was written with the help of an AI tool)
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
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Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
