Gold prices are under pressure from the rising dollar, but geopolitical risks provide support ahead of the NFP

Current Market Dynamics

Gold prices are struggling to advance this Friday, retreating from the US$ 4,400 level during the Asian session. The context is marked by the strengthening of the US dollar, which reaches its highest level in nearly a month, exerting direct pressure on the non-yielding commodity. Despite this selling pressure, the movement remains moderate, reflecting the uncertainties surrounding upcoming American economic releases.

Factors Keeping Volatility Contained

The much-anticipated release of the US non-farm employment data (NFP), scheduled for today, acts as a turning point for both the dollar and gold prices. The dovish signals stemming from expectations of Federal Reserve (Fed) rate cuts create a counterbalance to dollar appreciation, preventing more significant gains for the currency and limiting gold’s decline.

US Treasury Secretary Scott Bessent reinforced in an interview with CNBC that a reduction in interest rates would be the missing component to further accelerate economic growth, suggesting that the central bank should not delay its moves. The market prices in the concrete possibility of employment cost reductions in March, followed by additional cuts throughout the year, a scenario that could provide significant support to the commodity.

Expectations for Employment Data

Expected figures for December indicate the creation of 60,000 new jobs, a more modest movement compared to the 64,000 recorded in November. Simultaneously, the unemployment rate is expected to decline from 4.6% to 4.5%, signaling a still resilient labor market. These data will offer crucial clues about the Fed’s monetary policy stance in the coming months and will play a decisive role in the dynamics of the dollar and, consequently, gold prices.

Geopolitical Tensions as a Support Factor

Rising global geopolitical uncertainties act as a cushion against declines for the XAU/USD pair. The US administration signaled its intention to manage Venezuela’s resources and explore its oil reserves, as declared by President Donald Trump to The New York Times. At the same time, China intensified restrictions on exports of rare earths and rare earth magnets destined for Japan, escalating diplomatic disputes. The prolonged war between Russia and Ukraine remains a persistent source of demand for safe-haven assets.

German Chancellor Friedrich Merz indicated that resolving the conflict in Ukraine remains distant, considering Russia’s inflexible position, warning of the risks of direct involvement of European troops in the war theater.

Technical Perspective and Market Signals

Gold prices remain above the 200-period exponential moving average, located at approximately US$ 4,322.58, maintaining the upward slope of the overall trend. The gradient of the moving average continues to support retracements, indicating that deeper declines find structural support at this level.

The MACD indicator is below the signal line and the zero mark but shows signs of recovery. The negative histogram is contracting, suggesting weakening selling pressure. The RSI operates at 56, above the neutral level of 50, aligned with improved momentum without signaling extreme overbought conditions.

Commodity bulls need a firm acceptance above US$ 4,500 to validate new directional bets. As long as the prevailing trend remains above US$ 4,322.58, the tone will stay constructive. A decisive break below this moving average would open space for a more pronounced retracement.

US Dollar Performance This Week

The US dollar shows considerable strength against major currencies, appreciating 0.60% against the euro and gaining 0.92% versus the Swiss franc. The Japanese yen depreciated by 0.90% against the dollar, while the Canadian dollar fell by 0.30%. These movements reflect a search for safety and confidence in dollar-denominated assets amid global uncertainty. The cross variation map of major currencies reveals a scenario where the dollar positions itself as the preferred safe-haven currency, competing with the Swiss franc, directly affecting the competitiveness of gold prices in relative terms.

Conclusion

Gold prices remain caught between the pressure of a stronger US dollar and the support provided by dovish Fed expectations, geopolitical tensions, and demand for safe assets. Market participants await more consistent signals before establishing new directional positions, focusing on today’s employment report as the main catalyst for the next significant move in gold and the US currency dynamics.