Gold shows consolidation patterns ahead of US Nonfarm Payrolls

Gold market remains uncertain as the US dollar and Treasury bond yields recover. This follows Fed Chair Jerome Powell’s optimistic comments at the DealBook Summit. Powell said the economy is growing faster than expected, with slightly higher inflation. His remarks boosted Wall Street hopes for a "soft landing" but pressured the safe-haven US dollar and initially supported gold prices. Despite this, expectations for a 25-basis points Fed rate cut this month remain the same, keeping Treasury yields low.

Moreover, gold prices struggled as the US dollar rose slightly. This was due to concerns about China’s economy, US-China trade tensions, and geopolitical risks. The recent data from the US labour market report and ADP employment figures add to the uncertainty. Traders are also watching global trade issues and Middle East tensions, which could impact market sentiment. With gold sensitive to these risks, traders are cautious, balancing economic news and global developments in their decisions.

The market is awaiting employment data, which could help gold prices break out of their current range. The market expects average hourly earnings (m/m) to reach 0.3%, slightly lower than the previous 0.4%, signalling slower wage growth. Moreover, analysts predict the Non-Farm Employment Change will rise significantly to 218K from the previous 12K, indicating stronger job creation. The unemployment rate will remain steady at 4.1%, reflecting stability in the labour market.

Gold consolidation patterns

The chart below shows that the price trades within an ascending channel before releasing employment data. However, the significant consolidation within this channel indicates price uncertainty. Such consolidations are typical in December, as prices often remain within narrow ranges. Gold Predictors triggered a buy signal at $2,555 and alerted premium members, resulting in strong profits. The emergence of an inverted head and shoulders pattern on a broader scale suggests that the overall trend remains bullish.

Short-term trading in December remains challenging as the market experiences strong fluctuations due to thin liquidity. Price direction may be uncertain, with quick drops potentially leading to strong rallies and vice versa. The best approach to trading gold in December is to focus on key levels and practice patience. The chart below highlights the short-term trades in 2024 delivered to members, showcasing their effectiveness. The gold market surged higher when trades were executed at key levels. The latest entry at $2,555 was also perfectly timed. However, the market's behaviour will test traders' strategies and resilience as December unfolds. Traders may exercise caution to avoid excessive risk during the thin liquidity in December.

Bottom line

In conclusion, the gold market remains in a cautious flux, shaped by economic indicators, geopolitical developments, and seasonal dynamics. Fed Chair Powell’s remarks on economic strength and inflation have created a mixed environment of optimism and uncertainty. The consolidation within the ascending channel reflects the market's indecision. December’s thin liquidity and fluctuating price movements further complicate short-term trading, requiring a focus on key levels and disciplined strategies. Despite these challenges, the broader bullish trend signalled by patterns like the inverted head and shoulders offers optimism. Traders prepared to adapt to the evolving landscape can find opportunities in this trend.

Unlock exclusive gold and silver trading signals and updates that most investors don’t see. Join our free newsletter now!