Gold price forecast: XAU/USD awaits Fedspeak after absolute blowout jobs report

Gold fundamental forecast – bearish

Gold prices plunged last week, as anticipated. The yellow metal sank 3.24 percent over the past five trading sessions. That was the worst drop since the middle of October. Most losses occurred on Thursday and Friday, bringing in -1.95% and -2.47%, respectively. Friday’s drop was the most intense single-day decline since July 2022 – see the chart below.

All eyes were on the Federal Reserve, which was on Wednesday. Chair Jerome Powell was seemingly unable to get markets to price out rate cuts anticipated towards the end of this year. Funny enough, the most intense price action occurred after the central bank raised rates by 25 basis points. It took a couple of key economic data prints to get markets to listen.

The first was another round of US initial jobless claims, which unexpectedly declined. Then on Friday, there was an absolute blowout of a non-farm payrolls print. 517k jobs were added in January, +329k more than the +188k estimate! In the context of data since 1996 (and excluding an extreme outlier in May 2020), this was about a 4% probability outcome.

There were some quirks in the data due to a seasonal adjustment as well as annual government benchmarking. Still, combed with jobless claims data, the US labor market is seemingly resilient in the wake of the most aggressive Fed in decades. Markets added about half a rate hike to the year-end outlook. That pushed up the US dollar and government bond yields.

That spelled trouble for the anti-fiat yellow metal and may continue to do so in the week ahead. In terms of economic data, the week ahead notably cools. Key event risks include jobless claims and University of Michigan Sentiment. Rather, the focus will probably shift to Fedspeak.

A slew of policymakers will talk throughout the week. These include Jerome Powell, John Williams and Patrick Harker. They may continue to stress the need to remain vigilant in the wake of the jobs report. That is a recipe for dovish expectations to continue fading, which spells trouble for gold.

Gold weekly performance

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.