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Gold Prices May Fall on Rosy NFPs after US Senate Temporarily Lifted Debt Ceiling

Gold Prices May Fall on Rosy NFPs after US Senate Temporarily Lifted Debt Ceiling

Daniel Dubrovsky, Strategist

Gold, XAU/USD, Treasury Yields, Non-Farm Payrolls, US Dollar, Technical Analysis - Talking Points:

  • Gold prices fall, Treasury yields rise on interim US debt ceiling solution
  • An upbeat non-farm payrolls report risks accelerating XAU/USD losses
  • Falling Wedge breakout losing momentum, retail traders reduce short bets

Gold prices aimed cautiously lower over the past 24 hours. The anti-fiat yellow metal was left vulnerable as the ongoing rise in Treasury yields dampened the appeal of the non-interest-bearing asset. Still, it could have been worse. A slightly softer US Dollar worked to cushion the XAU/USD’s downside potential. The haven-linked currency was likely pressured by improving risk appetite as the S&P 500 climbed.

Markets likely welcomed the near-term solution to the US debt ceiling. During Friday’s Asia-Pacific trading session, the Senate extended the cap to December 3rd. That reduced the risk of default, lifted uncertainty and boosted market sentiment. Meanwhile, a pullback in natural gas prices may have also played a role in bolstering risk appetite. Russia seemingly hinted at increasing supplies to Europe.

All eyes turn to the US non-farm payrolls report as traders head into the weekend. The Citi Economic Surprise Index is up to -15.50 from a low of -61.60 in September. In other words, while economists are still underestimating the health and vigor of the economy, this has been by an increasingly smaller margin. A relatively rosier outcome compared to the August print may keep bond yields elevated, pressuring gold.

Check out the DailyFX Economic Calendar for more key events!

Gold Technical Analysis

On the 4-hour chart, gold prices have been consolidating between the 1769 – 1766 and 1740 – 1747 inflection zones since late September. XAU/USD appeared to break above a bullish Falling Wedge chart formation, but follow-through has been lacking. That is undermining the breakout. A push lower exposes the September low. Otherwise, a climb places the focus on the 200-period Simple Moving Average.

XAU/USD 4-Hour Chart

Gold Prices May Fall on Rosy NFPs after US Senate Temporarily Lifted Debt Ceiling

Chart Created Using TradingView

Gold Sentiment Analysis

According to IG Client Sentiment (IGCS), about 74% of retail traders are net-long gold. Downside exposure has decreased by 5.68% and 20.23% over a daily and weekly basis respectively. We typically take a contrarian view to crowd sentiment. Since most traders are net-long, this suggests gold may continue falling. Recent shifts in positioning are further underscoring a bearish contrarian trading bias.

Gold Prices May Fall on Rosy NFPs after US Senate Temporarily Lifted Debt Ceiling

*IGCS chart used from October 7th report

--- Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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