Gold extends the range play near one-month top, next move hinges on US NFP

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• Gold price consolidates its recent gains to a one-month peak touched on Thursday.
• Traders opt to wait on the sidelines ahead of the release of the critical US jobs report.
• A combination of factors lends support to the XAU/USD and favours bullish traders

Gold price (XAU/USD) oscillates in a narrow range through the early part of the European session on Friday and trades just below a one-month high, around the $2,065 region touched the previous day. Diplomatic efforts to achieve a ceasefire in the Palestinian enclave have accelerated, which, along with a modest bounce in the US Treasury bond yields, act as a headwind for the safe-haven precious metal. 

That said, the planned US strikes in response to the killing of three American soldiers by a drone in Jordan keep investors’ on the edge. Furthermore, continued weakness in the Chinese economy should keep a lid on the latest optimism. Apart from this, a modest US Dollar (USD) downtick, amid bets that the Federal Reserve (Fed) will eventually start cutting rates in 2024, lends support to the non-yielding Gold price. 

Against the backdrop of the aforementioned mixed fundamental backdrop, traders prefer to wait on the sidelines ahead of the release of the US monthly employment details, due later during the North American session. The popularly known Nonfarm Payrolls (NFP) report will be looked for fresh cues about the Fed’s policy path, which, in turn, will drive the USD and produce some meaningful impetus to the XAU/USD. 

Daily Digest Market Movers: Gold price bulls remain on the sidelines amid risk-on, ahead of US NFP

• A series of unsubstantiated reports of a ceasefire between Israel and Hamas boosts investors’ confidence, capping the upside for the safe-haven Gold price on the last trading day of the week.
• Reports suggest that Hamas received its first proposal for an extended pause to the fighting in Gaza in exchange for releasing the remaining hostages it holds, though has not yet responded to it.
• The Houthi rebels claimed that it struck a US merchant ship in the Red Sea, while the US launched new air strikes in Yemen, targeting ten drones reportedly being set up to launch.
• Concerns about the health of regional lenders in the US resurfaced on Thursday after New York Community Bancorp reported increased stress in its commercial real estate portfolio.
• China’s official Manufacturing PMI contracted for a fourth successive month in January, suggesting that the world’s second-largest economy is struggling to regain momentum.
• Fed Chair Jerome Powell said on Wednesday that interest rates had peaked and would move lower in coming months, though tempered market expectations for any such a move in March.
• The yield on the benchmark 10-year US government bond remains below the 4% mark amid bets for a steep rate cut by the Federal Reserve in 2024 and undermines the US Dollar.
• The Labor Department reported that Initial Jobless Claims increased by 9,000, to 224K during the week ended January 27 from the previous week’s upwardly revised reading of 215 K.
• Separately, the Institute for Supply Management’s (ISM) Manufacturing PMI improved from 47.4 to 49.1 in January, while the Prices Paid Index climbed to 52.9 from 45.2 in December.
• The XAU/USD seems poised to snap a two-week losing streak as investors now look to the US jobs data for cues about the Fed’s policy path and some meaningful trading opportunities.
• The popularly known NFP report is expected to show that the US economy added 180K jobs in January, down from the 216K previous, and the jobless rate edged higher to 3.8% from 3.7%.

Technical Analysis: Gold price flat-lines above $2,050 level, bullish potential seems intact

From a technical perspective, bulls might now wait for some follow-through buying beyond the $2,065 area, or a one-month top touched on Thursday, before placing fresh bets. Given that oscillators on the daily chart have just started gaining positive traction, the Gold price could then accelerate the momentum towards the $2,078-2,079 region, or the YTD peak set in January. The subsequent move-up should allow the XAU/USD to aim back to reclaim the $2,100 mark and climb further towards the next relevant hurdle near the $2,020 area.

On the flip side, the $2,042-2,040 strong horizontal resistance breakpoint now seems to protect the immediate downside ahead of the 50-day Simple Moving Average (SMA), currently pegged near the $2,033-2,032 zone. A convincing break below the latter could drag the Gold price to the $2,012-2,010 area en route to the $2,000 psychological mark. Failure to defend the said support levels might shift the bias in favour of bearish traders and expose the 100-day SMA support near the $1,982 region, before the XAU/USD drops to the very important 200-day SMA, near the $1,965 area.