Gold price outlook: Fed’s speakers and NFP report eyed as XAU takes cues from equity market

Gold prices fell around 0.5% on Wednesday, halting a rally that started last week and took the yellow metal nearly 6% higher after touching the lowest levels since April 2020. Bulls benefited from a revival in market sentiment that saw traders pile into equities while ditching the safe-haven US dollar. Bond traders helped drag yields lower, adding another tailwind for the non-interest-bearing asset.

Those trends weakened on Wednesday. US equity indexes, despite a valiant intraday effort, ended the day with losses. The benchmark S&P 500 index closed 0.2% lower, while the Nasdaq-100 Index posted a 0.08% loss. And if it weren’t for a surge in crude oil prices that boosted the energy sector, the selloff would have been much more pronounced. The S&P 500 GICS energy sector gained 2.08%. Eight of the index’s eleven sectors were negative.

For now, gold prices hold a healthy correlation with US equity indexes, which are largely at the whims of Federal Reserve rate hike bets. That said, XAU traders may want to take their cues from the S&P 500, as I proposed last month. Asia-Pacific stocks, outside of China, are bucking the overnight bearish trend. That is giving XAU a small lift as prices trade just above 1720.

Equity markets may not have much steam left. The Federal Reserve’s Mary Daly stated, “we are resolute at raising the interest rate into restrictive territory…” when asked if the Fed would change its rate path in a Bloomberg TV interview. One of the more traditionally dovish members, Ms. Daly’s comments stand as a stark warning to traders who appear giddy to jump the gun on signs of easing.

That isn’t stopping rate traders from pricing in a pivot, possibly as soon as May, according to Fed funds futures. Overnight index swaps are even more generous, pricing in a small chance for a cut by next March. The US non-farm payrolls report due out Friday can sway those bets significantly, and Fed speakers Mester and Kashkari are scheduled to speak on Thursday. That said, it may be a volatile next 48 hours for markets, including gold prices.

Gold technical outlook

Prices are stalling at the 50-day Simple Moving Average (SMA), and a level of support turned resistance stemming from April 2021. A pullback would aim for support that sits around the 1680 level before prices threaten the September low. Alternatively, a break higher brings the August high at 1807 into focus. The MACD oscillator is showing positive momentum as it tracks higher towards its centerline.

XAU/USD daily chart

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