The XAU/USD pair faces a crucial test of support after the January US Jobs Report exceeded expectations, revealing the addition of 353,000 new jobs compared to the forecasted 180,000. The robust labor market data and upward revisions for December numbers have shifted rate expectations, reducing the likelihood of a March rate cut.
The Federal Reserve, previously expected to cut rates in March, now has more flexibility to assess inflation data in the coming weeks before considering any adjustments. The market sentiment is leaning away from a March rate cut, with the anticipated total rate cuts for 2024 now reduced to 125 basis points from the earlier projection of around 150 basis points.
Amid a relatively calm week ahead with minimal impactful economic data, the focus will likely shift to Federal Reserve commentary as the FOMC blackout period concludes. The prospect of unchanged US rates for a more extended period has diminished the short-term appeal of non-interest-bearing gold.
Gold is currently testing prior horizontal support around $2,033 per ounce, along with the 20- and 50-day simple moving averages. The precious metal’s short-term uptrend, marked by a series of higher lows, has been broken. Without significant buyer intervention, gold may test support levels at $2,010 and then $2,000 per ounce. Limited upside is anticipated in the coming days, with recent highs around $2,065 per ounce posing potential resistance.
While gold could receive a safe-haven boost in case of heightened Middle East tensions, the dominant driver remains the interest rate backdrop, which currently limits the precious metal’s short-term upward movement.
