NFP Day poses a looming threat of freefall for Gold (XAU/USD) prices

7 July 2023, Friday
NFP Day poses a looming threat of freefall for Gold (XAUUSD) prices

Gold Prices Continue to Recover as US Yields Rise and NFP Data Approaches


US Yields Rise and ADP Data Shows Strength


Gold prices in the Asian session continued to bounce back after reaching the important $1900/oz level. The strong data from the US yesterday helped push gold prices towards $1900, but they couldn’t stay below that level.


The US ISM services and ADP data released yesterday showed that the US economy is still doing well, despite some people saying a recession is coming. After seeing this data, investors started to think that the Federal Reserve might raise interest rates. This caused the prices of US government bonds to go up, which made gold prices go down.


US Yields Spike Higher


After the data was released, US government bond yields went up even more, which put more pressure on gold prices. The yield on the US 2-year government bond briefly reached 5.12%, the highest it’s been since 2007. But even with all this happening, the value of the US dollar is still struggling to stay high.


NFP Data and Gold Prices


Today, we are waiting for the NFP (Non-Farm Payrolls) data to be released. This data will show how many jobs were created in the US last month. If the data is good, it could mean that the US economy is doing even better, and that might make the Federal Reserve raise interest rates. This would cause US government bond yields and the value of the US dollar to go up, which would make gold prices go down.


Technical Outlook and Final Thoughts


Looking at the technical side of things, gold prices are currently trading in a range between $1890 and $1940. The $1934 level has been difficult for buyers to break through this week. Although there is a pattern that suggests gold prices might go up, considering the overall situation and the expectation of positive NFP data, it seems more likely that gold prices will go down.


If gold prices close below the $1900 level, it could mean that they will drop even further and test the 200-day moving average at around $1864. After that, the key support level at $1850 will be in focus.


IG Client Sentiment Data


Looking at the data from retail traders, it shows that 74% of them are currently betting that gold prices will go up.