Gold Shines Bright Near $2,700 Despite Upbeat US NFP
Gold prices saw steady gains on Friday, marking a four-day winning streak even in the face of stronger-than-expected U.S. nonfarm payrolls data. Despite dipping to daily lows of around $2,660, the yellow metal rebounded sharply to end the day to $2,687.
The robust jobs report increased the likelihood that the Federal Reserve would refrain from cutting interest rates in January. Additionally, it signaled of maintaining the current federal funds rate at its March meeting. The move highlights shifting market dynamics and underscores gold’s resilience in an uncertain economic environment.
However, Goldman Sachs has projection that the Federal Reserve is likely to implement three key interest rate cuts in 2025. According to their analysis, the first-rate reduction, amounting to 25 basis points, is expected to occur in March. This will be followed by subsequent rate cuts in June and September. By the end of this easing cycle, the federal funds rate is anticipated to settle within the range of 3.5% to 3.75%.
Gold buyers unaffected after NFP
The December US NFP report showed solid job growth to 256k, well above the expected 160k mark. November’s data was revised down to 212k. However, recent data shows a strong economy. The unemployment rate also fell to 4.1% from the expected 4.2%. On the other hand, wage growth slowed to 3.9% against the expected 4%. This slowdown in wages shows easing inflationary pressure.
Initially, the US dollar index (DXY) spiked sharply to 110.00, with US 10-year yields rising to 4.767%. Usually, higher yields and a stronger dollar weigh on gold prices. However, the gold’s quick turnaround shows a strong underlying demand for the precious metal.
Fed’s stance
The NFP data has also reshaped the market expectations around the Fed’s monetary policy. Traders had previously anticipated multiple rate cuts in 2025. Fed’s Goolsbee pointed out that the U.S. economy seems to be at full employment, with wage growth aligning with the Fed’s 2% inflation target.
What’s next for gold?
The gold traders will focus on US CPI, PPI and Retail Sales data ahead. These events may also influence Fed policy expectations and gold prices. Market participants may also be cautious due to a fire outbreak in Los Angeles that could weaken the greenback. For now, gold is resilient despite a stronger dollar and robust NFP, which shows its appeal as a hedge in uncertain times.
Technical Picture
Gold is currently approaching a critical resistance zone, which aligns with multiple technical confluences across various trading strategies. These key levels suggest a potential area of interest for traders monitoring price action and market momentum. Below are the primary factors contributing to this resistance level:
- Bearish Order Block – December 2024 Highs: A bearish order block resting at the highs of December 2024 adds further resistance in this zone, indicating potential selling pressure.
- ABCD Pattern Completion: Price action also indicates the completion of an ABCD harmonic pattern, aligning with the resistance levels and signaling potential exhaustion in the current bullish momentum.
- January 2025 Monthly Resistance 1: The Monthly Resistance 1 level of January 2025 further reinforces this critical resistance area, enhancing the likelihood of a reaction at this point.
- Monthly Pivot – November 2024: The current price action is nearing the monthly pivot level established in November 2024, which has historically acted as a significant point of resistance.
Support Levels and Trendline Analysis: On the downside, the nearest support level is positioned at the break of a bullish trendline. This area also coincides with an unconfirmed bearish order block, which could act as a key level for buyers to step in, depending on market reaction.
Conclusion
Gold remains resilient near $2,700 despite strong U.S. jobs data and a rising dollar, underscoring its safe-haven appeal amid uncertainty. Key upcoming economic data and technical resistance levels could shape its trajectory.
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