- Summary:
- The demand for inflation hedge is likely to keep gold price on the ascent despite the Fed finding another reason to keep interest rates high.
Gold price extended its rally on Friday, gaining for the fourth successive day as US dollar fundamentals gave way. Spot market bullion hit four-week highs of $2,697 and was up by 0.9% at the time of writing, with safe haven demand providing tailwinds. US labour markt data was the biggest driver of the day following the release of Non Farm Payrolls (NFP) and unemployment figures.
Safe Haven Demand Outstrips Strong Labour Market
December’s NFP numbers printed out at 256k, rising from November’s 212k (revised downward from 227k) and exceeding analysts’ forecast figure of 164k. Private sector NFP figures followed the cue, coming out at 223k against the median consensus forecast of 135k. Overal unemployment rate declined from November’s 4.2% to 4.1% in December, lower than analysts’ forecast rate of 4.2%.
The strong show by the US labour market did not break gold price’s upward momentum, as investors chose the metal due to concerns over the performance of the US economy under Donald Trump, who will assume office in ten days’ time.
The Fed will feel justified to keep interst rates elevated, making the forecast-beating NFP data counterproductive. Higher-for-longer interest rates could keep the economy heated up amid a potential tariff war. This has driven up safe haven demand for gold as the metal is used as an inflation Hedge.
Gold Price Forecast
The momentum on gold price calls for further upside by gold price. The metal will likely pivot at $2,688 and the first resistance is likely to be at $2,695. However, an extended control by the buyers will break above that level and could test the second barrier at $2,700.
On the other hand, moving below $2,688 will favour the sellers to take control.That will likely see the first support come at $2,682.The upside narrative will be invalid if the XAUUSD pair breaks below that level. Also, the resulting momentum could extend losses and potentially test $2,674.
