Gold Price Rebounds Despite Strong US Job Additions and Fed’s Rate Cut Path Challenge

  • Gold recovers from post-labor report drop as investors weigh Fed’s cautious disinflation stance.
  • Upcoming US inflation and retail sales data set to influence gold’s trajectory and Fed policy.

Amid significant US job additions, the gold price rebounded by 0.69% on Friday, marking the fourth consecutive day of gains. Traders showed resilience against a strong United States (US) Nonfarm Payrolls report, challenging the Federal Reserve’s (Fed) potential rate cut decisions. The XAU/USD pair currently trades at $2,687, up 0.69%.

Market Reaction to US Labor Report

Initially, bullion faced a sharp decline after the US Bureau of Labor Statistics (BLS) disclosed an impressive growth in the workforce, exceeding 200K new jobs. This led to a decrease in the Unemployment Rate, prompting investors to reconsider their expectations for interest rate cuts. The economy’s ability to create sufficient jobs and a stall in the disinflation process, as noted in the Fed’s latest minutes, contributed to the market’s initial reaction.

However, the XAU/USD pair rebounded as market participants processed the data, reassuring Fed officials about the stability of the labor market amidst ongoing inflation concerns following the Fed’s recent rate cuts.

US Dollar and Treasury Bonds Movement

The US Dollar surged to multi-month highs based on the US Dollar Index (DXY), reaching 109.96 before retracing slightly to 109.68, up by 0.49%. Concurrently, US Treasury bond yields experienced a notable increase, particularly in the mid-range of the yield curve, although they eventually stabilized.

Implications for Fed Policy and Gold Trajectory

Chicago Fed President Austan Goolsbee highlighted the robust job creation, indicating stability in the labor market. He suggested that if inflation remains subdued and economic conditions are steady, a downward adjustment in rates could be considered. This sentiment underscores the importance of monitoring future data releases to gauge the Fed’s policy direction.

Daily Digest Market Movers: Gold Price Surges Accompanied by the US Dollar

  • Gold price resilience against higher US real yields and a surge in the US 10-year T-note yield.
  • Key insights from the US Bureau of Labor Statistics (BLS) report on job additions and unemployment rate trends.
  • Expectations regarding the Federal Reserve’s rate adjustments in response to economic data.
  • US Consumer Sentiment data and its impact on market sentiment.

XAU/USD Technical Outlook: Gold Price Momentum and Key Levels

Gold’s uptrend remains intact, with the XAU/USD pair displaying a series of higher highs and higher lows. The Relative Strength Index (RSI) indicator reflects strong bullish momentum, indicating a positive trajectory for gold prices.

Key Resistance and Support Levels

  • If XAU/USD surpasses $2,700, the next resistance levels are at $2,726 and the all-time high of $2,790.
  • In case of a decline below $2,650, support levels at the 50 and 100-day Simple Moving Averages (SMAs) at $2,645 and $2,632, respectively, should be monitored.

Overall, the technical outlook suggests a favorable environment for gold prices, with potential for further gains if key resistance levels are breached.

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