Gold edges lower ahead of US NFP as recovering bond yields and Fed rate-rise bets underpin USD

• Recovering US bond yields underpin the USD, leaving Gold facing fresh selling pressure.
• Gold faces an additional headwind as oil-related inflation concerns sustain expectations of a Fed rate rise.
• The forthcoming US NFP report is now the focus for traders seeking a clearer market catalyst.

A modest recovery in US bond yields from a two-month low is helping the US Dollar (USD) extend its rebound from Thursday's weakest level since late September. Against that backdrop, Gold (XAU/USD) faces renewed selling during Friday's Asian session after failing to establish a foothold above $4,100, continuing the previous day's retreat from a two-week high. The firmer dollar is viewed as a drag on the precious metal. Losses nevertheless appear contained, as traders may avoid taking sizeable directional positions before the release of the key US monthly employment figures.

October's US Nonfarm Payrolls (NFP) report is expected to show 65K new jobs, compared with the previous month's subdued 29K increase, while the unemployment rate is forecast to remain at 4.2%. Investors will also scrutinise Average Hourly Earnings, given the potentially significant influence of wage growth pressures on expectations for Federal Reserve (Fed) policy. The closely followed economic releases are likely to generate financial market volatility and shape demand for the USD, giving gold a meaningful catalyst.

Concerns that artificial intelligence development could slow followed a Democratic sweep in the US midterm elections. Wall Street suffered a sharp sell-off on Thursday as a result, while traditional safe-haven assets, including US government Treasuries, attracted greater demand. Inflation worries resurfaced, however, after crude oil prices rebounded strongly overnight. With traders still assigning around a 70% probability to another increase in borrowing costs at the US central bank's December meeting, US bond yields are staging a modest recovery from their midweek fall, lending support to the dollar.

Uncertainty surrounding US President Donald Trump's next step is also keeping the geopolitical risk premium in place. Speaking on Thursday, Trump said the US may have to destroy the rest of Iran and that people would know soon enough if he acts. Meanwhile, differences between the US and Iran persist over Tehran's nuclear programme and the Strait of Hormuz. The resulting support for the dollar's safe-haven appeal is seen as another weight on the Gold price. Even so, the commodity remains comfortably above the psychological $4,000 level and looks set to post its first weekly gain in three weeks.

XAU/USD on the 4-hour chart

Gold Retains a Constructive Near-Term Technical Bias

Above the Fibonacci cluster bounded by the 50.0% retracement at $4,006 and the 38.2% level at $4,039, the near-term outlook for XAU/USD remains constructive. Bulls nonetheless have reason for caution after the intraday drop 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. The Moving Average Convergence Divergence (MACD) indicator, however, remains positive: its line is above zero, while earlier histogram gains suggest that bullish pressure is taking a pause rather than reversing.

Further selling beneath the 38.2% Fibonacci retracement at $4,039 would therefore be required to strengthen the case for a decline towards the deeper support of the 50.0% retracement near $4,006. Should these levels give way, the 61.8% retracement at $3,973 and the 78.6% level at $3,926 would come into view. Initial resistance, meanwhile, sits at the 23.6% retracement at $4,080; 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.)