Gold Weekly Forecast Bullish: And Markets await US employment data for the upcoming Outlook

• Gold stabilized above $2,500 after testing that level earlier in the week.
• The technical outlook shows XAU/USD’s bullish bias remains unchanged in the near term.
• Key US data releases, including Nonfarm Payrolls, could trigger the next big move in Gold.

Following a tranquil start to the week, gold (XAU/USD) briefly fell below $2,500 amid a wide US Dollar (USD) recovery. Although the precious metal struggled to gain positive momentum, it managed to stay over $2,500 ahead of next week’s crucial macroeconomic data releases from the United States. 

Gold remains within touching distance of all-time highs.

After concluding the previous week on a positive note due to Federal Reserve (Fed) Chairman Jerome Powell’s dovish remarks at the Jackson Hole Economic Symposium, gold gained somewhat on Monday and Tuesday. In the lack of fundamental drivers, the yellow metal’s upside remained constrained.

The continued strength of the US dollar (USD) caused gold to fall midweek. The unfavorable move in the markets’ risk appetite in anticipation of Nvidia’s quarterly earnings helped the USD gain demand as a safe haven, bringing XAU/USD just below $2,500. Nonetheless, the pair recovered late in the American session and ended the day above this level.

Upbeat macroeconomic data releases from the United States helped the dollar keep its ground on Thursday. The Bureau of Economic Analysis (BEA) has raised the annualized Gross Domestic Product (GDP) growth rate for the second quarter to 3%, up from 2.8% in the previous estimate. In addition, the Department of Labor reported 231,000 first-time applications for unemployment benefits in the week ending August 24, a little decrease from 233,000 the previous week. Technical gold sellers remained on the sidelines as $2,500 proved to be a firm support, allowing XAU/USD to disregard the continuing USD rally.

Meanwhile, Germany’s dismal inflation report weakened the Euro (EUR) against its peers on Thursday. XAU/EUR increased by more than 1% on the same day, indicating that gold captured capital outflows from the Euro.

In July, inflation in the United States, as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, remained constant at 2.5% on an annual basis, the BEA announced on Friday. The core PCE Price Index, which excludes volatile food and energy costs, up 2.6% in the same period, matching June’s gain but falling short of the market projection of 2.7%. The core PCE Price Index increased 0.2% on a monthly basis, as expected. These data had no impact on trading, and gold remained within its daily range above $2,500 as the weekend approached.

Gold investors wait for US labor market data.

The US financial markets will be closed on Monday to observe the Labor Day vacation. The August ISM Manufacturing Purchasing Managers Index (PMI) will be released on Tuesday in the United States. Investors predict the headline PMI to rise to 47.8 from 46.8 in July. A rating above 50, indicating that economic activity in the manufacturing sector has recovered into expansion area, might strengthen the USD with an instant reaction and weigh on XAU/USD.

On Thursday, the ADP Employment Change and ISM Services PMI data from the United States will be analyzed for new impetus. The market’s reaction to this data is expected to be basic and brief, with positive surprises strengthening the USD and negative printing weakening the currency ahead of Friday’s highly anticipated August jobs report.

Nonfarm Payrolls (NFP) in the United States are expected to expand by 163,000 in August, following July’s lackluster 114,000 increase. The unemployment rate is predicted to fall to 4.2% from 4.3%, with monthly wage inflation, as measured by the change in average hourly earnings, reaching 0.3%.

Fed Chairman Powell stated at the Jackson Hole Economic Symposium that they will do everything possible to foster a strong job market while making additional progress toward price stability. Similarly, “we want the labor market to stay about where it is, and we need to adjust the policy rate to keep it there,” San Francisco Fed President Mary Daly said earlier this week.

Following the July policy meeting, Fed members made it plain that they are moving their focus to the labor market, citing mounting signals of deterioration. As a result, even a minor departure from the market consensus in the NFP number could cause a significant reaction in Gold. A better-than-expected print may persuade investors to desist from pricing in an aggressive Fed policy relaxation, resulting in a robust comeback in the USD and weighing on gold. According to the CME FedWatch Tool, markets now expect the Fed to decrease its policy rate by at least 100 basis points by the end of the year. On the other side, a second consecutive weak NFP print might pave the way for another move lower in US Treasury bond yields and the USD, allowing XAU/USD to rise heading into the weekend.

Carsten Fritsch, a commodity strategist at Commerzbank, stated in a recent study that gold does not have much upward potential in the short future.

“According to Bloomberg, gold ETF holdings increased by 15 tonnes last week to their highest level in six months.” Speculative interest is especially intense. The net long position of speculative investors increased to roughly 193,000 contracts in the week ending August 20th, while gold reached an all-time high, its greatest level in over four and a half years,” Fritsch added.

“Much of the favorable news for gold may have already been factored in. We feel vindicated in our belief that gold has no meaningful upside potential for the time being. “We see more room for the three other precious metals that have not caught up with gold in recent weeks,” he said.