Upcoming NFP Report Puts Bearish Pressure on Gold
The gold (XAU/USD) price declined by 0.3% on Thursday as the US dollar (USD) strengthened ahead of the critical US jobs report.
XAU/USD has been rising almost uninterruptedly since 30 January. It's not surprising that some investors decided to take profit and close their long positions ahead of the US nonfarm payroll (NFP) report, which is traditionally considered one of the most volatile events in the market.
"In addition to the volatility in general, we still have inflation in the background that's starting to creep up, so gold is responding as a safe haven. Gold is on its way for $2,900, and you have very strong sentiment despite the fact that in the short term, the US dollar gained strength", said Alex Ebkarian, chief operating officer at Allegiance Gold.
Indeed, renewed trade tensions between the US and China have not only increased geopolitical uncertainty but also stoked fear of higher inflation, leading many investors into safe-haven assets like gold and silver.
Earlier today, XAU/USD was rising during the Asian and early European trading sessions. Today, the US Bureau of Labour Statistics will publish its NFP report at 1:30 p.m. UTC. The report will clarify the state of the US jobs market, revealing the latest unemployment figures and average hourly earnings. This data release may influence US interest rate expectations and investors' sentiment and will likely affect the US dollar (USD) and related pairs, including XAU/USD (gold). The market expects the number of jobs created to increase by around 170,000 in January and hourly earnings to grow by 3.8% annually. If the report is stronger than expected, XAU/USD may pull back noticeably. If the data comes below the expected, gold may receive a minor boost.
"Spot gold may retest resistance at $2,883 per ounce, with a good chance of breaking above this level and rising to $2,901", said Reuters analyst Wang Tao.
Euro Fails to Strengthen on Weak US Economic Data
The euro (EUR/USD) lost 0.2% against the US dollar (USD) on Thursday after the greenback moved higher despite weaker-than-expected Jobless Claims report.
After hitting more than a 2-year low in mid-January, EUR/USD has recovered somewhat. Technically, the pair is still trading within a major long-term bearish trend. Still, safe-haven flows into the US dollar have been weakening slightly over the past few days as investors started to believe that a global trade war could be averted.
"Driving this correction have been several factors, the largest of which has probably been this week's tariff news, where it looks like the Trump administration has been using tariffs for transactional, not ideological purposes", said Chris Turner, global head of markets at ING.
Investors believe that US tariffs are purely negotiating tactics and aren't intended to turn the US into a protectionist state. However, even if the eurozone can avoid higher US tariffs, its long-term economic prospects still look bleak. Yesterday's eurozone retail sales figures came out weaker than expected, and traders still expect the European Central Bank (ECB) to pursue a more dovish monetary policy than the Federal Reserve (Fed).
Earlier today, EUR/USD was falling slightly during the Asian and early European trading sessions. Today's main event is the US nonfarm payroll (NFP) report due at 1:30 p.m. UTC. It is one of the most highly-anticipated news releases in the Forex market and will likely trigger above-normal volatility. The market expects the number of jobs created in January to increase by around 170,000 and hourly earnings to grow by 3.8% annually. If the NFP numbers exceed the forecast, EUR/USD will likely drop towards 1.03000. Otherwise, EUR/USD will probably rise above 1.04500.
BTC Moves Sideways Due to Cautious Investors' Sentiment
On Thursday, Bitcoin (BTC/USD) managed to rise above $99,000 but failed to move higher and finished the day essentially unchanged from Wednesday.
BTC/USD has been moving sideways since the end of December 2024 as a strong rally fueled by Donald Trump's victory in the US Presidential elections lost momentum, consolidating within a $93,000–106,000 range. The bearish pressure increased later as the risk of a potential trade war between the US and China scared investors and caused a sell-off across financial markets. Fundamentally, BTC/USD has been trading as a risk asset akin to the NASDAQ Index and hasn't got the same safe-haven flows as gold, which means that the crypto coin continues to positively correlate with investors' risk sentiment. Thus, the current rise in geopolitical risks and the Federal Reserve's (Fed) hawkish stance on US interest rates must have a bearish impact on BTC/USD.
At the same time, there has been some bullish news, which may support BTC/USD in the long run. Blackrock (NYSE:BLK), the world's largest asset management firm with over $10 trillion in assets, has announced its plans to list a bitcoin exchange-traded product (ETP) in Europe. This would be Blackrock's first crypto-linked ETP outside the US and may attract significant interest due to Blackrock's reputation, leading to higher capital inflows into BTC.
Earlier today, BTC/USD was rising slightly during the Asian and early European trading sessions. The US nonfarm payroll (NFP) report due at 1:30 p.m. UTC may trigger above-normal volatility in BTC/USD. Higher-than-expected figures will likely increase the chances that the Fed will maintain interest rates at the current level, potentially potentially provoking a minor sell-off in BTC/USD. Conversely, lower-than-expected results may drive BTC/USD higher, possibly towards $100,000.