Gold (XAU/USD) languishes near the lower end of its daily range heading into the European session on Thursday. The precious metal, however, lacks follow-through selling amid mixed cues and currently trades above the $5,050 level, well within striking distance of a nearly two-week low touched the previous day.
The blowout US Nonfarm Payrolls (NFP) report released on Wednesday tempered market expectations for a more aggressive policy easing by the Federal Reserve (Fed) and prompts some selling around the non-yielding bullion. The closely-watched US monthly employment details showed that the economy added 130K new jobs in January, up from the previous month’s revised print of 48K and beating expectations for a reading of 70K.
Other details revealed that the Unemployment Rate edged lower to 4.3% from 4.4%, while annual wage inflation, as measured by the change in the Average Hourly Earnings, held steady at 3.7%, compared to the expectation of 3.6%. Traders were quick to react and are now pricing in around a 95% chance that the US central bank will leave rates unchanged in March, up from 80% the previous day, according to the CME’s FedWatch tool.
Meanwhile, Cleveland Fed President Beth Hammack said that the labor market looks like it is finding a healthy balance and that it is important for the central bank to get back to the 2% inflation goal. She added that policy is right around neutral and that it is good for the Fed to hold rates unchanged. Adding to this, Kansas City Fed President Jeffrey Schmid noted that further rate cuts could allow higher inflation to persist for longer.
The US Dollar (USD) looks to build on the post-NFP bounce from a nearly two-week low, though it lacks bullish conviction amid bets that the Fed will deliver two 25 basis points (bps) rate cuts this year, with the first reduction seen in July. Adding to this, threats to the US central bank’s independence might keep a lid on the attempted USD recovery and continue to act as a tailwind for the Gold price, warranting some caution for aggressive bears.
The market attention now shifts to the release of the latest US consumer inflation figures on Friday, which could offer more cues about the Fed’s rate-cut path and drive the USD demand. In the meantime, Thursday’s release of the US Weekly Initial Jobless Claims will be looked upon for short-term opportunities. Nevertheless, the supportive fundamental backdrop might continue to support and act as a tailwind for the Gold.
XAU/USD 4-hour chart
Gold bulls have the upper hand while above the 50% Fibo. level
Momentum signals are mixed as the Moving Average Convergence Divergence (MACD) histogram contracts toward the zero mark at 0.17, with the MACD line marginally above the Signal line and upside pressure fading. The Relative Strength Index prints at 55.65 (neutral), aligning with a modest bullish tilt. The 200-period Simple Moving Average (SMA) on the 4-hour chart rises steadily, and the Gold price holds above it, preserving a positive underlying bias. The 200 SMA currently stands at $4,757.23 and serves as immediate dynamic support.
Measured from the 5,599.68 high to the 4,409.26 low, the XAU/USD trades between the 50% retracement at $5,004.47 and the 61.8% Fibonacci retracement at $5,144.94, with the latter acting as resistance. A decisive push through the latter could extend the recovery phase, while failure to build momentum would keep XAU/USD consolidating above the rising 200-period SMA.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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