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• Gold price bulls are moving in to test a 38.2% Fibonacci retracement. 
• Gold price bears are lurking and eye a break of $1,804 to then test the 200 DMA.
• All eyes are on the Nonfarm Payrolls event and next week's US Consumer Price Index. 

Gold price is up some 0.9% and has traveled from a low of $1,812.02 and moved higher sharply to test $1,835.64 as the US Dollar shed some more points in the DXY index, moving from a three-month high set earlier in the week.

A risk on appetite came about in early trade on Wall Street which benefitted the Gold price as United States of America economic data has proven that there are signs of cracks in a tight US jobs market. This occurred a day before Friday's US Nonfarm Payrolls event and is in contrast to how the markets were starting to position following Federal Reserve's Chair Jerome Powell's hawkish rhetoric to Congress earlier in the week. However, US stocks have come undone but the Gold price remains bid nevertheless. 

US Jobless Claims moved higher by 11% last week. This was the largest increase in five months. At the same time,  planned layoffs for February quadrupled year-on-year. This data might be indicating that the Federal Reserve's hiking cycle has been playing out as intended and negates the need to hike aggressively. Consequently, the Gold price shot higher with  US Treasury yields easing which is a bullish sign for Gold price since the metal offers no interest. The US 10-year note was last seen paying 3.927%, down from the highs of 4.019%.

The rise in the Gold price comes following another red day for the US Dollar index, DXY, which is losing around 0.33% at the time of writing after falling from a high of 105.729 and after making a low for the day of 105.153. The US Dollar surged earlier in the week following hawkish Congressional testimony by Federal Reserve chair Jerome Powell. Fed's Powell explained to lawmakers that the central bank will raise rates higher and faster after a series of strong economic reports showed the economy continues to run hot. Consequently, market expectations for a 50 basis point rate hike from the Federal Reserve shot higher.

As noted by analysts at Brown Brothers Harriman, WIRP now suggests nearly 70% odds of a 50 bp hike at the March 21-22 Federal Open Market Committee meeting:

''Looking ahead, 25 bp hikes in May and June are priced in that would take Fed Funds to 5.50-5.75%, with over 30% odds of a last 25 bp hike in Q3 that would move the range up to 5.75-6.0%.''

''After all this repricing, an easing cycle is still expected to begin in the fourth quarter, albeit at much lower odds. Eventually, it should be totally and unequivocally priced out into 2024 during the next stage of Fed repricing,'' the analysts added and said, ''for now, we believe the uptrends in US yields and the US Dollar remain intact.''
 

US Nonfarm Payrolls and US Consumer Price Index headwinds

As for the Nonfarm Payrolls, this event will be part of a duo that is going to be instrumental in guiding market expectations regarding the policy guidance likely to be offered by the FOMC at the March meeting.  

''We look for payroll gains to mean-revert to 230k in February following the gangbuster report that saw job creation surge to 517k in January,'' analysts at TD Securities said. ''We also expect the Unemployment Rate to remain unchanged at a historically low level; while average hourly earnings likely accelerated to a 0.4% m/m gain, lifting the YoY measure to a still-elevated 4.8%.'' The analysts added, ''we think the hurdle is rather high to see USD weakness prevail; data would have to materially surprise to the downside.''

We then have the US Consumer Price Index next week and analysts see this increase by 0.4% MoM and headline CPI to rise by 0.5% in February.

''Price pressures were intense and broad-based in January, more so than in previous months. A potential sign that inflation pressures are intensifying again,'' analysts at ANZ Bank said. ''Annual revisions to the CPI seasonal factors by the BLS show inflation over the course of H2 2022 did not ease as much as initially reported. This means the Fed is facing a more persistent sticky inflation battle than it thought earlier this year,'' the analysts argued. 

''Recent activity and inflation data portray a resilient economy suggesting the Fed still has more work to do to slow demand, particularly in the labor market. We expect there will be upward revisions to the terminal fed funds rate (FFR) forecast at the March FOMC meeting,'' the analysts at ANZ added leaving scope for a headwind for the Gold price bugs for the imminent future. 
 

Gold price technical analysis

(Click on image to enlarge)

The gold price crossed back above the $1,825 mark in the pursuit of the neckline of M-formation's neckline. We have Gold price support at $1,804 and resistance above $1,850 with territories between the move into the 38.2% and 78.6% Fibonacci scale open to a test. Should the bears commit, then there will be prospects of a move to test the Gold price 200 DMA in the coming days with the $1,1770s eyed in that regard. 

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