Gold Price Forecast: Bulls move in ahead of the critical NFP

• Gold is correcting from a significant sell-off in the week ahead of NFP.
• The bulls eye a 50% mean reversion but it all comes down to key data on Friday. 

The gold price is consolidatred and flat on the day, oscillating around $1,739 after edging up from a nine-month low early on Thursday. The precious metal has climbed from a low of $1,736.58 and has reached a high of $1,749.13 on the day as markets get set for Friday's US Nonfarm Payrolls data.

The data on Friday will be keenly eyed and the gold price will send on it. The yellow metal has been pressured on the back of recession fears and weak stock markets that have seen investors move into the US dollar and bonds instead. With that being said, Wall Street benchmarks have climbed rose on Thursday, as investors reacted positively to the previous day's commentary from Federal Reserve offices that the aggressive pace of interest rate hikes could be tempered if growth suffered.

Meanwhile, the dollar index (DXY), which measures the currency against six counterparts, fell after Wednesday's peak of 107.27, a level not seen since late 2002. Investors are weighing the risks of a recession and whether interest rate hikes will be paused as global demand is under pressure. The Atlanta Fed's GDPNow model estimates seasonally adjusted GDP growth on an annual basis in the second quarter was -2.1%.

Minutes from the central bank's June policy meeting, where the Fed raised interest rates by a surprise 75 basis points, showed on Wednesday a firm restatement of its intent to get prices under control. Nevertheless, there was an acknowledgement that the risk of rate increases having a "larger-than-anticipated" impact on economic growth and judged that an increase of 50 or 75 basis points would likely be appropriate at the policy meeting in July.

For Friday, US Nonfarm Payrolls are expected to rise by 268,000 in June after an increase of 390,000 jobs in May, while the unemployment rate is expected to hold steady just above the pre-pandemic level. ''We expect employment to have continued to recover in February following the unexpectedly strong January report—despite the Omicron-led surge in COVID cases,'' analysts at TD Securities explained.

''That said, we look for some of last month's boost to fizzle, though to a still firm job growth pace. Wage growth likely slowed to a still strong 0.5% m/m, as the lower-wage workers affected by Omicron in January returned to work.''The analysts at TDS explained that a miss on the headline might provide a knee-jerk USD pullback, reflecting hopes of further dialling back of central bank hawkishness.'' 

Gold technical analysis

Gold is trading below the rising supporting trendline on the monthly time frame but the critical fractal lows are located at $1,676.

Meanwhile, in the prior day's analysis, it was acknowledged in the above chart that the price has been reaching a key area on the daily chart where bulls were expected to emerge from. A correction to mitigate the imbalance of bids in this sell-off could see the yellow metal correct with a 50% mean reversion on the cards: