Gold Price Analysis: XAU/USD flirts with a key daily 61.8% golden ratio

• The price of gold is meeting a 61.8% Fibonacci retracement
• Should gold price break this 61.8% ratio, then there will be prospects of a move to $1,970.
• Eyes on US NFP and Russian peace talks with Ukraine. 

Trading at $1,935, the gold price is a touch lower at the start of the last day of the week, down some 0.1%. The yellow metal has travelled from a high of $1,937.92 to a low of $1,932.56 so far. 

Overnight, the precious metal was better bid its status as a safe-haven asset kept the bulls in play as markets await Russian & Ukraine peace talks to start again today. ''While geopolitical crises do not last forever, we expect the secondary impacts of the Russia-Ukraine crisis to provide a strong level of support for gold prices this year,'' analysts at ANZ Bank said. 

Additionally, the analysts said that their ''gold valuation model shows that exogenous forces can widen the spread between the spot price and fair value. That premium has shot from zero to USD300/oz since Russia invaded Ukraine, suggesting a hefty risk premium.''

''Finally, the analysts explained that the ''broader isolation of Russia will see a structural shift in the energy sector, which will be inflationary. There is also a higher risk of weaker economic growth (particularly in Europe). This should create a positive backdrop for investor demand for the foreseeable future.''

Eyes on the Fed & NFP

Meanwhile, an eye a series of 50bps hikes from the Federal Reserve is expected during Q2 combined with quantitative tightening. The markets, in this regard, are awaiting today's key event in the Nonfarm Payrolls report. More on that below, but this will be an important set of data for the Federal Open Market Committee as it deliberates raising rates by 50bps in May.

Meanwhile, the US dollar climbed on Thursday as a lack of progress in peace talks between Russia and Ukraine boosted demand for the safe-haven currency. The dollar index (DXY), which weighs the greenback against a basket of six global peers, was up 0.76% by the close of the North American session and is stable in a quite pre-NFP Asian session so far. The greenback has attracted safe-haven flows since Russia's Feb. 24 invasion of Ukraine and is on track for a rise of around 1.6% for the month of March, and around 2.8% for the first quarter, hamstringing the advances in the yellow metal.

However, at the same time, the 2y-10y curve flirting with inversion has further fueled talk of a recession on the horizon Analysts at TD Securities explained that this is ''offering another positive dynamic for the gold market.'' On Thursday, the US bond yields were mixed and the curve continued to steepen, with the 2-10yr curve now almost flat. The 2-year government bond yields rose from 2.30% to 2.34% while the 10-year government bond yields slid back to 2.34%.

As for data, US personal income and spending in February rose 0.5%m/m (matching expectations) and 0.2%m/m (est. +0.5%MoM). The PCE deflator rose 6.4%y/y (prior 6.0%YoY), with core slightly below expectations at 5.4% YoY (est. 5.5% YoY, prior 5.2% YoY).

The March Chicago PMI jumped to 62.9 (est. 57.0, prior 56.3) while the employment segment rose to 48.1 from 43.5.  Weekly Initial Jobless Claims edged up to 202k (est. 196k, prior 199k), with continuing claims at 1.307m (est. 1.340m, prior 1.342m).

Looking to the Nonfarm Payrolls today, they are expected to continue reflecting healthy gains in employment growth in March and the Unemployment Rate is expected to come in lower. ''The historically tight labour market should continue to support average hourly earnings (Westpac f/c: 0.3%mth, 5.4% year),'' analysts at Westpac said. 

Meanwhile, analysts at ANZ bank explained that ''given the strength in the labour market and upward pressure on wages, the Fed’s expectation of a swift reduction in inflation to average levels in 2023 may be optimistic.''

''The Fed needs to target a reduction in demand in order to rein in surging inflation pressures, and that won’t be easy at a time when supply-side pressures are continuing to add fuel to the inflation fire. Avoiding a hard landing will require expert judgment and no shortage of luck,'' the analysts argued. 

Gold technical analysis

The price of gold is meeting a 61.8% Fibonacci retracement on the prior daily bearish impulse. If this holds, then there will be prospects of a move back into the demand area that has been holding up the bears for a number of trading days. On the other hand, should the price break this 61.8% ratio, then there will be prospects of a move into test the neckline of the M-formation higher up near $1,970.