Gold falls as traders increase Fed hawkish bets after stellar NFP

Gold (XAU/USD) price retreats by about 0.80% on Friday, after registering losses of over 2% following the release of an upbeat US jobs report. This boosted the Greenback amid growing speculation that the Federal Reserve (Fed) could raise rates if inflation data next week comes hotter than expected. At the time of writing, XAU/USD trades at $4,437.

XAU/USD retreats as upbeat jobs data supports Dollar and September tightening risks

Nonfarm Payrolls in August crushed estimates of 56K, coming in at 162K, while July’s print was upward revised from -23K to 21K. At the same time, the Unemployment Rate was unchanged at 4.1%. The data reassured Fed officials that if needed, they can raise rates without harming the labor market.

Last week, Fed Chairman Kevin Warsh said the jobs market was “consistent with full employment” in a speech in Jackson Hole, in which he leaned hawkish, placing inflation as the foremost mission.

On Thursday, Fed Governor Christopher Waller said the Fed isn't rushing to raise rates if inflation cools, but a weak data release next week favors a rate increase at the FOMC's meeting.

Money markets have priced in a 61% chance for a rate increase by the Fed at the September meeting, up from 54% a day ago, as shown by Prime Terminal.

US Treasury yields, namely the 10-year T-note, rose to a high of 4.81% before erasing post-NFP gains and are down to 4.768%. The Greenback also gave back some of its gains, but it remains in positive territory, as indicated by the US Dollar Index (DXY).

The DXY, which measures the performance of the US Dollar against six currencies, is up 0.13% at 99.13.

Following the US NFP release, traders await next week’s producer and consumer inflation reports. If both show persistent disinflation, a rate hike might not be necessary.

Next week, the US economic docket highlight will be the release of the Producer Price Index (PPI), the Consumer Price Index (CPI), jobless claims data, the US Monthly Budget Statement and the University of Michigan Consumer Sentiment for September.

XAU/USD technical outlook: Gold consolidates within 100- and 200-day SMAs

Price action shows Gold is poised to trade sideways, capped on the downside by the 100-day Simple Moving Average (SMA) at $4,354 and on the upside by the 200-day SMA at $4,534.

The Relative Strength Index (RSI) is bullish, but in the short term it is trending downward toward the 50-neutral level, an indication that sellers are gaining momentum.

For a bearish continuation, XAU/USD must drop below the $4,400 mark, followed by the 100-day SMA. Below this area, the next target will be the day's low at $4,282.

For a bullish continuation, Gold must rise above $4,450. If buyers gain enough momentum, they could challenge $4,500 before targeting August’s monthly peak of $4,697.