XAU/USD sees drop to near $1,860 ahead of US jobs data

  • The price of gold is down near $1,860.00 as uncertainty surrounding the US NFP release looms.
  • An extremely tight labor market could add inflationary pressures.
  • The formation of an inverted flag chart pattern could weigh on gold prices.

The price of gold (XAU/USD) is hovering in a narrow range of $1,872.95-$1,881.46 as investors await the release of US Nonfarm Payrolls (NFPs), which are due Friday. The asset saw a sharp drop after testing the barricade of $1,910.00 and aims to slide further to near $1,860.00 amid uncertainty over US jobs data.

The monetary policy announcement by the Federal Reserve (Fed) led to a firmer rebound in gold prices, but most of them were abandoned as the uncertainty of the interest rate decision was postponed by the US NFP. US Labor Market Additions are expected to land at 391k versus the previous print of 431k.

Despite the decades-long solid inflation hangover, the US economy is experiencing a tight labor market, which shows that growth has not disappeared and the economy is far from recession fears. However, a tight labor market could also fuel inflationary pressures, as more job creation will lead to higher wages, which will eventually add price pressures and an extremely tight labor market would increase the odds by 75 points. basis (bp) by the Fed.

Gold technical analysis

The precious metal is forming an inverted flag chart pattern over a shorter time frame. The formation of the above mentioned chart pattern indicates a consolidation after a single decline, which will be followed by a further downward move. The 50-period exponential moving average (EMA) at $1,883.86 is trending lower adding to downside filters while the 20-period EMA at $1,879.15 acts as a major resistance for price action. ‘gold. Meanwhile, the Relative Strength Index (RSI) (14) is hovering in the 40.00-60.00 range but is likely to attract volatility after slipping decisively below 40.00.

15 minute gold chart