Gold Price Analysis: XAU/USD holds firm in $1880s pre-US jobs data, but set to end choppy week lower

• Gold prices are trading resiliently in the mid-$1880s on Friday ahead of US jobs data.
• It’s been a choppy week for gold after the Fed hiked interest rates by 50 bps as expected on Wednesday.
• Ultimately, XAU/USD looks set to end the week lower as US yields press higher.

Despite the US Dollar Index (DXY) hitting fresh 20-year highs to the north of the 104.00 level earlier in the day on Friday, spot gold (XAU/USD) prices have remained resilient. An earlier dip into the upper $1860s per troy ounce has been reversed and the precious metal is currently changing hand in the mid-$1880s, up about 0.3% on the day, as the US dollar pares earlier gains and focus shifts to the upcoming release of US labour market data at 1330BST.

The upcoming Bureau of Labour Statistics data release, which is expected to show nearly job gains of nearly 400,000 in the US last month, as well as the unemployment rate falling to 3.5% from 3.6%, will be viewed in the context of how it impacts the outlook for Fed policy. Earlier this week, the Fed raised interest rates by 50 bps and outlined quantitative tightening plans as expected, whilst also signaling intent to continue with 50 bps rate hikes at upcoming meetings in a bid to get interest rates back to around 2.5% by the end of the year.

The market’s initial interpretation of Fed Chair Jerome Powell’s post-meeting message was dovish given he essentially ruled out the possibility of a 75 bps move at any upcoming meeting. That helped XAU/USD prices rally to weekly highs above the $1900 level in early Thursday trade. However, a sharp rise in US yields and bond markets took a more hawkish view of events saw gold quickly release its grip on the $1900 level.

While a historic drop in US equity markets on Thursday helped keep safe-haven gold’s losses fairly contained (XAU/USD still trades more than 1.5% above earlier weekly lows), gold is nonetheless on course to post a third consecutive weekly loss. If the upcoming jobs report triggers further fears of a US wage-price spiral that would require a more aggressive monetary tightening response from the Fed, XAU/USD may retest weekly lows just above the $1850 level.