Gold prices remained subdued above the $2,900 per ounce mark on Friday even as the precious metal is set to experience a weekly gain.
“The commodity, however, remains confined in a multi-day-old trading range as traders seem reluctant and opt to wait for the crucial US monthly employment details,” Haresh Menghani, editor at FXstreet, said in a report.
The forthcoming Nonfarm Payrolls (NFP) report will likely impact the US Dollar’s (USD) short-term price movement and could potentially stimulate activity in the precious metals market, according to Menghani.
Investor confidence continues to be negatively affected by concerns regarding the global economic impact of US President Donald Trump’s trade policies.
This has resulted in a decline in equity markets while simultaneously bolstering the appeal of safe-haven assets like gold.
At the time of writing, the April gold contract on COMEX was at $2,921.69 per ounce, down 0.2% from the previous close.
Trade tariff uncertainty
The dollar remained near its lowest point since November 11 due to growing concerns about how Trump’s trade tariffs will affect the US economy.
This is likely to provide support for gold prices.
Menghani added:
The uncertainty surrounding Trump’s trade policies, especially after another U-turn on the recently imposed tariffs on Mexico and Canada, continues to weigh on investor sentiment and could support the safe-haven precious metal.
Goods from Canada and Mexico that comply with the US-Mexico-Canada Agreement will be exempt from the 25% tariffs for a month starting Thursday. The tariffs had gone into effect on Tuesday.
The economic policies implemented by the Trump administration have been widely perceived as potential catalysts for economic instability.
This perception has consequently driven investors towards safer assets, such as gold, which has experienced a surge of over 10% in value since the beginning of the year.
Gold, with its historical reputation as a haven, has benefited from this trend.
Moreover, the prospect of the US Federal Reserve cutting interest rates in the coming months has also boosted sentiments.
Easing of the monetary policy
Investors expect further easing of the monetary policy by the US Fed due to concerns over slowing economic growth in the country.
Patrick Harker, President of the Philadelphia Fed, warned of increasing threats to economic expansion and risks to the inflation outlook on Thursday. He did, however, admit that the economy seems to be expanding and that unemployment is still low.
Atlanta Fed President Raphael Bostic cautioned that the US economy is undergoing significant changes, and the Fed must remain attentive to any developments that affect prices and employment.
He emphasised the uncertainty surrounding the future direction of the economy.
Christopher Waller, Fed Governing Board Member, stated that he strongly opposes a rate cut in the upcoming March meeting.
However, he believes that rate cuts later in the year are still possible if inflation continues to decrease.
Gold prices: economic data and technical outlook
US initial jobless claims for the week ending March 1 dropped unexpectedly to 221,000.
However, this decline failed to bolster the USD or impact the XAU/USD pair, Menghani said.
The US NFP report will be closely watched by investors on Friday for further economic clues.
Forecasts suggest an addition of 160,000 new jobs in February and a steady unemployment rate of 4%.
“Gold has recovered this week. But the big question is if last week’s correction is all there is, or if there’s more downside to come,” said David Morrison, senior market analyst at Trade Nation said.
Investors are once again favoring gold as a safe haven and alternative investment due to its stability compared to the volatility of Bitcoin and other cryptocurrencies, which often mirror stock market trends.
Last week’s sell-off has certainly helped to take the MACD down from overbought levels. While still a long way from being neutral, the pullback in the MACD is enough to give gold some room to the upside.
According to FXstreet, the $2,926-$2,930 per ounce range has emerged as an immediate hurdle for gold.
If prices break above this level, gold could rise further to record highs.
“Some follow-through buying would be seen as a fresh trigger for bullish traders and pave the way for the resumption of the recent well-established uptrend witnessed over the past three months or so,” Menghani said.
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