Commodity Market: Gold edges higher, supported by softer dollar ahead of the US Non-Farm Payrolls report

Spot Gold edged higher on Friday as the US Dollar plummeted to a 2 1/2-week low ahead of the keenly anticipated US Non-Farm Payrolls data, which could affect the Federal Reserve’s hawkish policy stance.

Last week the yellow metal registered a 1 1/2-month trough after the US central bank signaled a possible rate hike in March to curb high inflation.

Although Gold is often used as a hedge against inflation and geopolitical risks, it tends to be very sensitive to increases in US interest rates. It is so, as higher rates usually translate into higher opportunity cost of holding Gold which pays no interest.

As of 9:48 GMT on Friday Spot Gold was edging up 0.27% to trade at $1,809.84 per troy ounce. Last week the yellow metal slipped as low as $1,780.33 per troy ounce, which has been its weakest price level since December 16th 2021 ($1,775.60 per troy ounce).

The commodity looked set to register its sixth gain in eight weeks, while being up 1.03%.

Meanwhile, Gold futures for delivery in April were edging up 0.37% on the day to trade at $1,810.75 per troy ounce, while Silver futures for delivery in March were up 0.76% to trade at $22.545 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.04% to 95.316 on Friday. Earlier in the trading session the DXY slipped as low as 95.137, which has been its weakest level since January 18th (95.129).

In terms of macroeconomic data, today market players will be paying attention to the January report on US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings due out at 13:30 GMT. Employers in all sectors of US economy, except the farming industry, probably added 150,000 new jobs last month, according to a consensus of analyst estimates.

“If the jobs report out of the United States encourages the Fed’s hawkish mood, it should lead to a significant breakdown in gold,” DailyFX currency strategist Ilya Spivak said.

“Despite a rebound in many assets that weakened because of the Fed’s hawkish stance and the dollar pulling back, gold has not been able to mount a rally, which indicates significant underlying weakness,” Spivak noted.

Near-term investor interest rate expectations were little changed. According to CME’s FedWatch Tool, as of February 4th, investors saw an 82.8% chance of the Federal Reserve raising interest rates to the 0.25%-0.50% range at its policy meeting on March 15th-16th, compared to an 85.7% chance on February 3rd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,800.87
R1 – $1,813.06
R2 – $1,821.22
R3 – $1,833.40
R4 – $1,845.59

S1 – $1,792.71
S2 – $1,780.53
S3 – $1,772.37
S4 – $1,764.21