XAU/USD corrects to near $4,060 amid caution ahead of US NFP data

• Gold price retreats from $4,147 to near $4,047 ahead of US NFP data for October.
• The US Dollar bounces back as investors turn cautious ahead of US labor market report.
• OCBC expects the divided government may constrain fiscal expansion and weigh on US growth.

Gold corrects to near $4,047 after failing to extend the United States (US) midterm elections outcome-driven advance above $4,147 on Friday. A strong recovery move in the Gold price from its recent lows of $3,870.25 has been halted as the US Dollar (USD) regains ground, with financial markets turning cautious ahead of the Nonfarm Payrolls (NFP) data for October, which will be published at 13:30 GMT.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.13% higher to near 101.70. Technically, a higher US Dollar makes the Gold price an unfavorable risk-reward bet for investors.

According to estimates, the US economy is expected to have created 65K new jobs, higher than 29K in September. The Unemployment Rate is seen as steady at 4.2%.

Average Hourly Earnings, a key measure of wage growth, is expected to have grown at a moderate pace of 2.9% Year-on-year (YoY) against 3% in September. On a monthly basis, the wage growth measure is seen rising 0.3% against the previous reading of 0.1%.

The data is expected to have a limited impact on Federal Reserve’s (Fed) interest rate expectations as remarks from Federal Open Market Committee (FOMC) members in last several months have signaled that they are more concerned about prolonged elevated inflation. About employment conditions, members have indicated that the labor demand has remained steady.

Fed’s Logan delivers a distinctly hawkish message on October 30, with an FXS Speechtracker score of 8/10, slightly above the 7.7/10 historical average and signaling stronger-than-usual tightening bias relative to the established baseline. The insistence that the Fed “needs at least two more quarter-point rate hikes,” combined with the view that skipping a meeting does not alter the policy destination and that it is “unacceptable” that inflation is not headed back to 2%, underscores a clear commitment to making policy modestly restrictive while using gradual adjustments to limit economic damage and help households, businesses, and investors adapt to higher rates. Logan’s emphasis on strong economic growth, solid consumer spending, balanced-to-tightening labor markets, and supportive financial conditions further validates the case for additional tightening rather than an imminent pivot.

The FXS Fed Sentiment Index rose by 0.95 points to 143.62, firmly in hawkish territory and consistent with the above-baseline tone captured by the FXS Speechtracker. This elevated level signals that markets should expect the Dollar to remain supported as investors price in further policy tightening and a prolonged period of restrictive Fed stance.

Gold witnessed a strong buying interest after US Republicans face a setback in midterm elections on Wednesday. Democrats win majority seats in both Houses of Federal law. The victory of Democrats and a likely outcome of divided government prompted fears of tougher regulations on spending in Artificial Intelligence (AI) infrastructure and prolonged shutdown next year.

Strategists at OCBC highlight those precious metals “rebounded sharply following the US midterm elections, supported by a softer USD, lower US Treasury yields and oil prices as markets reassessed the implications of political gridlock for US fiscal policy and growth.” In their view, the shift in the political landscape has helped ease concerns over aggressive fiscal expansion, with “expectations that political gridlock may constrain fiscal expansion and weigh on US growth” offering “some relief to yields,” while “slippage in oil prices also lent support.” Against this backdrop, OCBC notes that “Gold rallied around 3%, reclaiming the 4000 level,” underscoring how the metal has responded to the more favourable macro mix of a weaker Dollar, lower yields and softer energy prices.

In the daily chart, XAU/USD trades at $4,047.83, keeping a mildly bearish near-term bias as it remains capped by the 20-day exponential moving average (EMA) at $4,064.36. Price action holds just under this dynamic barrier, suggesting topside attempts are still vulnerable, while the Relative Strength Index (14) at 46.82 stays below the midline and hints at lacking bullish conviction rather than outright selling pressure.

On the topside, immediate resistance is the November 5 high at $4,147, followed by $4,200. Looking down, the recent low of $3,870.25 will be the key support level.