Gold rises to near $4,100 ahead of US NFP data

Gold prices surged to a high near $4,085 on Friday, driven by a weaker US Dollar and lower oil prices. Traders will observe the US employment report released later on Friday for insights into monetary policy. The Democratic victory in the US midterm elections propelled the metal higher, as it sparked speculation that the Iran war might end soon, causing investors to cut rate hike expectations.

Analyst David Meger stated that while rate hike expectations are not completely gone, lower energy prices suggest a potential slowdown in inflation and a reduced need for rate hikes in the future. The Federal Reserve's December rate hike probability, as per CME's FedWatch tool, is now at 70.9%. Higher interest rates make holding non-yielding gold less attractive, as the opportunity cost rises.

On Friday, the US jobs data will be crucial, with an expected 65,000 jobs added in September and a flat unemployment rate of 4.2%. Positive labor market indicators could bolster the US Dollar, exerting downward pressure on the gold price. Strategists at OCBC noted that precious metals rebounded following the US midterm elections due to a softer Dollar, lower US Treasury yields, and oil prices.

Gold has risen around 3%, reclaiming the $4,000 level, as investors reassess the impact of political gridlock on US fiscal policy and growth. The bank sees promising signs as gold starts responding positively to a favorable macro backdrop, but cautions that further gains would require a slowdown in Fed tightening expectations and ongoing investment demand recovery.

The strategists continue to track real yields, USD direction, oil prices, and ETF flows to gauge sustained buying interest. Friday's US payrolls data will be another key test. In the daily chart, gold remains constrained in the short term, holding below the 100-day simple moving average ($4,200) while trading just above the 20-day Bollinger middle band ($4,070).

This setup indicates a short-term correction within a higher price environment, with the Relative Strength Index at 49.63 signaling neutral to slightly positive momentum. Should buyers manage to break above the 100-day SMA, the next resistance level would be the 100-day SMA ($4,200) and the upper Bollinger band ($4,250). Conversely, a dip below the 20-day Bollinger middle band could signal further downside risk.