Gold Price Forecast: XAU/USD Holds Awaiting Jobless Claims and Core PCE Data

• Gold price hovers above $1,940 as investors await US NFP data.
• The US ADP jobs report suggests that the NFP report could show that job creation is slowing.
• The ADP report also showed the slowest wage growth since October 2021.

The price of Gold (XAU/USD) moves sideways after a recovery inspired by soft demand for labor due to the deteriorating economic outlook. The precious metal is expected to stay sideways as investors are likely to make a decision after the release of US Non-Farm Payrolls (NFP) data on Friday.

The US ADP employment report, released on Wednesday, showed that the labor market is not as resilient as previously thought. Companies have slowed down their hiring process, adding to evidence of an uncertain economic outlook. Weaker demand for labor boosted hopes of a soft landing for the Federal Reserve (Fed), as Chairman Jerome Powell conveyed at the Jackson Hole Symposium that inflation has become more sensitive to the labor market.

Market Drivers: Gold Price Moves Laterally Awaiting Core PCE

• Gold price is range-bound near a four-week high after securing stability above $1,940 as investors await US NFP data and ISM manufacturing PMI for August, which will be published on Friday.
• The precious metal continues its three-day winning streak and is expected to extend its recovery as US corporate labor demand begins to soften due to deteriorating demand.
• Following the decline in job vacancies, US ADP job change data showed the effects of rising interest rates. The ADP report for August showed that the US private sector added 177,000 employees, below expectations of 195,000 and less than half of July’s upwardly revised reading of 371,000.
• The slowdown in employment growth came mainly from the leisure and hospitality sector. Job creation in hotels, restaurants and other companies in the sector fell by 30,000 positions in August, after months of strong hiring.
• Wage growth also slowed in August. The annual growth of the wages of those who keep their jobs was 5.9%, while that of those who change jobs fell to 9.5%.
• The August figures are consistent with the pre-pandemic pace of job creation, said Nela Richardson, chief economist at ADP: “After two years of exceptional recovery-linked gains, we are moving towards more sustainable wage growth and employment as the economic effects of the pandemic recede,” he said.
• Fed Chairman Jerome Powell conveyed in his comment at the Jackson Hole Symposium that inflation is increasingly driven by the labor market. Therefore, the easing of labor market conditions could reduce the upside risks for inflation.
• According to the CME Group’s FedWatch tool, interest rates are expected to remain unchanged in September. Furthermore, it is considered that the Fed will keep rates stable at 5.25%-5.50% at the end of the year.
• Atlanta Fed President Raphael Bostic said monetary policy is tight enough to bring inflation to 2% in a reasonable amount of time.
• The US dollar falls back after an intense sell-off that brought it close to 103.00 points. However, the downside looks more favourable, as investors expect the Fed’s interest rates to have peaked. US 10-year Treasury yields rebounded moderately to 4.12%.
• US housing demand continues to be pressured by rising mortgage rates. Even so, the worst of the correction in the real estate sector seems to have passed due to the tight supply.
• According to real estate analysts polled by Reuters, forecasts of a fall in prices this calendar year have faded and the brief correction in the US housing market is over.
• Looking ahead, investors will focus on weekly jobless claims for the week ending August 25 and the underlying PCE price index for July.
• Monthly core PCE inflation is expected to grow at a steady 0.2%, while the annual reading would accelerate to 4.2%.

Technical Analysis: The price of Gold consolidates below $1,950

Gold price continues its three-day winning streak, but upside looks capped near $1,950 as investors await US NFP data for in-depth information on labor market conditions. The precious metal strengthens and manages to break the ascending channel chart pattern formed on a lower time frame. The yellow metal is stable above the 20 and 50 day EMAs, which supports further gains.