Why is gold edging lower as recovering bond yields and Fed hike bets bolster USD ahead of US NFP?

• Fresh selling weighs on Gold as a recovery in US bond yields lends support to the USD.
• The commodity faces further pressure as oil-led inflation concerns sustain expectations of another Fed rate hike.
• The forthcoming US NFP report is now in focus as traders await a meaningful market catalyst.

Fresh selling pressure returns to Gold (XAU/USD) in Friday's Asian session after it fails to sustain a move above $4,100, prolonging the previous day's pullback from a two-week high. A modest rebound in US bond yields from their recent two-month low allows the US Dollar (USD) to extend its recovery from Thursday's trough, its lowest since late September. The resulting dollar strength is seen weighing on the precious metal. However, losses appear limited, as traders may avoid aggressive directional positions before the crucial monthly US employment figures are released.

Expectations for the widely followed US Nonfarm Payrolls (NFP) report point to 65K job additions in October, compared with the previous month's weaker 29K reading, while the unemployment rate is projected to remain at 4.2%. Average Hourly Earnings will also draw close scrutiny: wage growth pressures could have a significant bearing on expectations for Federal Reserve (Fed) policy. These closely tracked macroeconomic releases are set to generate volatility across financial markets and shape demand for the USD, offering gold a meaningful catalyst.

Concerns that artificial intelligence development could slow following a Democratic sweep in the US midterm elections drove a sharp Wall Street sell-off on Thursday. Demand consequently increased for traditional safe-haven assets, including US government Treasuries. Yet a steep overnight rebound in crude oil prices revived worries about inflation. With traders still assigning around a 70% probability to another increase in borrowing costs by the US central bank at its December meeting, US bond yields are staging a modest recovery from their midweek slump, lending support to the Greenback.

Uncertainty surrounding US President Donald Trump's next step also keeps the geopolitical risk premium intact. On Thursday, Trump said the US might have to destroy the rest of Iran, adding that people would know soon enough if he took action. Differences between the US and Iran over Tehran's nuclear programme and the Strait of Hormuz remain unresolved. These factors provide further support to the safe-haven dollar, which is seen putting pressure on the Gold price. Even so, the commodity remains comfortably above the psychological $4,000 level and appears on course for its first weekly gain in three weeks.

What does the XAU/USD 4-hour chart indicate?

Technical Analysis: Can Bulls Retain the Near-Term Advantage?

Above the Fibonacci cluster bounded by the 50.0% retracement at $4,006 and the 38.2% level at $4,039, XAU/USD retains a constructive near-term outlook. Bulls nevertheless have reason for caution after the intraday decline below the 100-period Exponential Moving Average (EMA) on the 4-hour chart. Having retreated from overbought territory, the Relative Strength Index (RSI) now stands at 52.40, signalling neutral to mildly positive momentum. By contrast, the Moving Average Convergence Divergence (MACD) indicator remains positive. Its line is above zero, while earlier increases in the histogram suggest a pause in bullish pressure rather than a reversal.

To strengthen the case for an extended decline towards the deeper support at the 50.0% retracement near $4,006, sellers would need to follow through below the 38.2% Fibonacci retracement at $4,039. A breach of these levels would bring the 61.8% retracement at $3,973 and the 78.6% level at $3,926 into view. Conversely, the 23.6% retracement at $4,080 marks immediate resistance. A sustained break above it would clear a path towards the recent cycle high of $4,146.

(The technical analysis of this story was written with the help of an AI tool. Know more.)