Gold Price Has More Room On Downside Ahead Of NFP

Gold climbed to its highest level since November at $1,853 on Wednesday but ended up losing more than 3% from that level to end the week deep in the negative territory below $1,800.

Nonfarm Payrolls are forecast to rise by 238000 in January. The low bar suggests that there is room for a positive surprise and a stronger-than-forecast NFP print should favour the dollar in the near-term.

On the flip side, a third disappointing reading in a row could weigh on the dollar and open the door for a rebound in XAU/USD; the gold index.

Average Hourly Earnings will be the key data point to watch. On a yearly basis, wage inflation is expected to rise to 5.1% from 4.7%. Fed policymakers are concerned that a steady rise in wages could cause consumer inflation to remain high for a prolonged period. High wage inflation should be seen as a dollar-positive and vice versa.

First support is located at $1,770, static level. In case this level turns into resistance, the next bearish target could be seen at $1,755, static level.

On the upside, the 100-day SMA forms the first resistance at $1,795. Even if XAU/USD reclaims that level, the 200-day SMA aligns as the next hurdle at $1,805. Only a daily close above the latter could attract buyers and help gold shake off the bearish pressure.