Gold Forecast: XAU/USD Loses $20 From Daily Highs Following US Jobs Data

• The price of gold extends its gains to three consecutive weeks, rising 0.54%.
• Stellar US jobs data puts more pressure on the Fed, while next week’s CPI is expected.
• The disputes between the United States and China add more uncertainty to the global economic outlook.

Gold prices remained on the defensive late in the American session after a US employment report showed that the Federal Reserve is “right” about curbing recession rumors. However, next week’s data, led by the consumer price index (CPI), could indicate that the Fed’s tightening is probably working. Meanwhile, the XAUUSD It trades at $1,773.33, down nearly 1%.

Before the Wall Street open, the US Bureau of Labor Statistics revealed that the July nonfarm payroll report added 528,000 people to the job market, beating estimates of 250,000. Even June data was revised higher, from 325,000 to 398,000, while the unemployment rate continued its downward path from 3.6% to 3.5%.

As for wages, specifically the median hourly wage, a key component of the employment report and closely watched by the Fed, rose 0.5% month-on-month, topping 5.1% year-on-year.

The financial market reaction sent the greenback jumping as the dollar index hit a daily high around 106,930, while the 10-year US bond yield hit a high of 2,869%. Additionally, money market futures expect a 75 basis point rate hike for the September meeting, while the yellow metal tumbled $35 to hit a daily low of $1,764 a troy ounce.

Also, Fed officials crossed wires on Thursday. Loretta Mester, president of the Cleveland Fed, said a 75 basis point rate hike for September “is not unreasonable.” Earlier in the week, St. Louis Fed President James Bullard was in favor of bringing forward rate hikes, further strengthening the case for the September FOMC meeting.

On the other hand, tensions between the US and China, following US House Speaker Pelosi’s trip to Taiwan, weighed on market sentiment. Following Pelosi’s visit, China conducted aggressive military drills around Taiwan and announced sanctions on Nancy Pelosi and her family on Friday.

In addition, China announced that it would stop cooperating with the US in some areas, such as climate change and defense, while also sending warships through the median line of the Taiwan Strait.

Therefore, the price of the yellow metal is likely to remain under pressure. Unless gold buyers push the price decisively above $1,800, the unprofitable metal would be vulnerable to further selling pressure.

What to watch out for

Next week, the US economic calendar will include inflation data, ie consumer and producer indices, initial jobless claims and consumer sentiment from the University of Michigan for August.

Gold (XAUUSD) Key Technical Levels