With the US service sector expected to contract, the gold price could be on its way back up. Gold prices are under pressure this week, but the metal may stage a comeback if US economic data disappoints market expectations over the coming days. US service sector activity is forecasted to contract in September and this may lead to diminished demand for gold as a safe-haven asset.
The XAUUSD exchange rate is trading at 1,290 currently, dipping from recent highs of 1,340 seen last Wednesday. What’s more, analysts expect the dollar to continue its ascent against high-yielding currencies such as the Mexican peso and AUDJPY. This could jeopardise gold’s appeal among investors looking for higher returns without negative currency risk.
Gold price outlook: XAUUSD is vulnerable ahead of US NFP
With the US service sector expected to contract in coming months, a move that has repeatedly been robustly predicted by experts and analysts across all markets, this may be an ideal time for investors to position themselves at what is likely to entice them. In fact, with gold prices recently struggling as they seek lows not seen since December 2016s low of $1201/oz, it is possible that any further falls will be pivotal in establishing a firm base for bulls moving forward.
Traders are being kept on the back foot with the price of gold struggling to break free from a narrow trading range that has been in place for several months now. Investors should, therefore, be mindful of the fact that a move above the $1260 level could be imminent as any attempts to break through are likely to see higher prices then.
Gold Price Outlook
The ICE US Dollar Index, or USDX, has been known to play a critical role in the gold price and it has been on the rise of late. After a sharp drop that occurred at the start of the year, the index is now trading higher by 0.5% compared to where it was trading at this point last month. It also has a significant bull flag pattern that could provide some help for buyers as any new advances are made.
This may easily be seen from the chart above in which golds price is clearly on a path of decline against both spot market prices and those being experienced when taking exchange rates into account. It should also be noted that the loonie has recently fallen by 0.6 percent at one point during the last few weeks, which is enough to make this strike a more significant one for golds price.
NFP and Gold Price Outlook
An interesting NFP report is imminent and investors should be mindful of this as it could very well determine what path the gold price takes moving forward. According to data from payroll service ADP, private US employers are expecting to cut 75,000 jobs within the next month.
Despite the amount being smaller than the 100,000 that was cut just last month, it is expected to surprise investors and analysts alike. This is due to the fact that the figure was expected to be 160,000 which would have been an increase from previous months. The overall size of the jobs market could be affected by this and it will likely deter investors from making significant investments as they wait for more accurate data from the initial US NFP report.
In fact, a drop in private employment is known to negatively affect interest rates and it could very well do so at this time too.
