Gold took a hit as it failed to reach the all-time high of $2,531, dropping over 0.80% by the end of the North American session, closing at $2,493. Speculation over a 25 or 50 basis point cut by the Federal Reserve in September intensified after mixed US economic data was released.
The US Bureau of Labor Statistics reported that Nonfarm Payrolls in August missed estimates but showed improvement compared to the previous month. The Unemployment Rate decreased, while Average Hourly Earnings rose.
Market uncertainty was reflected in Fed interest rate probabilities, with traders initially pricing in a 50 basis point cut with odds as high as 70%. However, as the dust settled, the likelihood of a 25 basis point cut increased to 73%, while a 50 basis point cut decreased to 27%.
Various Fed policymakers expressed support for rate cuts to maintain a balanced labor market, further influencing market sentiment. Despite falling US Treasury yields, the US Dollar Index rebounded above 101.00, putting pressure on Gold prices.
Market Analysis: Gold Price Decline Amid US Jobs Data
- US Nonfarm Payrolls rose by 142K in August, missing the forecast of 160K, with July figures revised downward.
- Unemployment Rate dropped from 4.3% to 4.2%, while Average Hourly Earnings increased from 3.6% to 3.8% year-on-year in August.
- Market indicators suggest the Fed may cut rates by at least 104 basis points this year, based on futures contracts.
Technical Analysis: Gold Price Outlook
Gold prices, while still showing an upward bias, faced a short-term negative shift as XAU/USD dropped below $2,500. The Relative Strength Index (RSI) turned bearish, signaling potential further losses.
If XAU/USD breaks below $2,470, the next support levels are around $2,431 to $2,435. On the upside, surpassing $2,500 could lead to a retest of the year-to-date high at $2,531.
Understanding Gold: FAQs
- Gold serves as a safe-haven asset during turbulent times and a hedge against inflation.
- Central banks hold significant Gold reserves to strengthen their economies and currencies.
- Gold price movements are influenced by the US Dollar, Treasuries, and geopolitical factors.