Gold price (XAU/USD) strengthens as the United States Automatic Data Processing (ADP) has reported a weaker demand for labor that what anticipated by the market participants. US private employers recruited 107K job-seekers in January, which were significantly lower than expectations of 145K and the prior reading of 158K. A slowdown in the labor demand is expected to scale up expectations for early rate-cuts by the Federal Reserve (Fed).
Market volatility is expected to remain escalated as investors await the monetary policy decision by the Fed. The Fed is expected to deliver a steady interest rate decision for the fourth time in a row. Investors will keenly focus on the bank’s guidance – future expectation – for interest rates, and that will probably direct action in the FX domain. Amid easing price pressures, further quantitative tightening is not expected from the Fed, therefore, market participants will focus on “when and at what pace” the central bank will start reducing interest rates. Investors are anticipating that the Fed will commence the rate-reduction process from May.
Previous Fed meeting guidance was for 75 basis points (bps) of cuts in interest rates in 2024. The market has been focusing on expectations for early cuts, however, comments from individual policymakers have been advising for keeping interest rates elevated at least for the first-half of the year – until they become confident that the underlying inflation rate will return to the Fed’s 2% target in a timely manner. Gold price jumps to near the crucial resistance of $2,050 as US Dollar falls sharply after US ADP reported a slower labor demand in January. The outlook for Gold price is bullish ahead of the Fed policy decision. The precious metal is forming a Symmetrical Triangle chart pattern on the daily chart. This suggests a probable eventual breakout in the direction of a dominant uptrend, although this type of triangle can break in any direction. Momentum is still weak as the 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range.