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Nov 4, 2021

Gold Prices React to the Fed, Yields & Non-Farm Payrolls (NFP)


  • Gold prices edge higher as the probability of a 2021 rate hike dissipates
  • Taper tantrum-free Fed meeting places the employment report (NFP) at the forefront of risk-sentiment
  • XAU/USD currently remains within the confines of key Fibonacci levels

In response to the Fed rate decision and the press conference that followed, Gold prices recovered a portion of this week’s losses as investors priced in a 2022 rate hike.

Although inflation currently remains above the target of 2%, the Federal reserve has continued to reiterate their commitment to the labor market, placing the Non-farm payroll (NFP) report at the forefront of risk sentiment.

DailyFX Economic Calendar

For Gold, Silver and other safe-haven assets that have a negative correlation (move in opposite directions) to the US Dollar, slightly less hawkish commentary from Fed Chair Jerome Powell saw Gold and Silver edge higher as expectations of a 2021 rate hike dwindled.

However, higher yields may continue to support the US Dollar which will may hinder gold's ability to climb higher.


After rebounding off of the 61.8% Fibonacci retracement level of the 2020 move which continues to hold as long-term support at $1,680, Gold bulls temporarily managed to drive prices back above $1,900 before falling back towards the upper bound of the descending channel that has been forming since prices peaked in August last year.

With the formation of a doji candle now appearing on the weekly chart at the 38.2% retracement level of the 2021 move, the NFP report is expected to be the major risk event for the imminent move.

Gold (XAU/USD) Weekly Chart

Chart prepared by Tammy Da Costa using TradingView

Meanwhile on the daily chart below, Gold prices are currently testing trendline resistance which coincides with the 50-day moving average (MA).

At the time of writing, additional resistance currently remains at the key psychological of $1,785 with support holding firm at the 50% retracement of the 2020 move at around $1,762.

Gold (XAU/USD) Daily Chart

Chart prepared by Tammy Da Costa using TradingView


Gold: Retail trader data shows 75.73% of traders are net-long with the ratio of traders long to short at 3.12 to 1. The number of traders net-long is 3.05% higher than yesterday and 5.11% higher from last week, while the number of traders net-short is 11.97% lower than yesterday and 4.77% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-bearish contrarian trading bias.

Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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