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Gold reached a two-week high of $2,378 on Thursday following weaker-than-expected jobs data announced by the US Bureau of Labor Statistics (BLS). The BLS report had a significant impact on US Treasury bond yields, which remained virtually unchanged, providing a tailwind for the precious metal. As a result, the XAU/USD pair traded at $2,369, registering a 0.54% gain after bouncing off weekly lows of $2,320.
Key Drivers:
ECB Interest Rate Cut: The European Central Bank (ECB) decided to cut interest rates, leading to an initial climb in US Treasury yields before they pared their gains.
US Jobs Data: The BLS revealed that the number of Americans filing for unemployment benefits exceeded consensus estimates and the previous week’s reading. This data influenced market sentiment and contributed to gold’s rally.
The US Dollar Index, measuring the Greenback’s performance against a basket of six currencies, dropped slightly to 104.14.
Focus Shifts to Nonfarm Payrolls:
Traders now shift their attention to Friday’s May Nonfarm Payrolls report. Estimates suggest the US economy will add 185,000 jobs, surpassing April’s figure of 175,000. The Unemployment Rate is expected to be 3.9%, and Average Hourly Earnings are projected to remain unchanged at 3.9%.
Initial Jobless Claims: For the week ending May 31, US Initial Jobless Claims rose to 229,000, exceeding estimates of 220,000 and the previous reading of 221,000.
ADP Employment Change: Private US hiring in May rose by 152,000, falling short of estimates of 175,000 and missing April’s figure of 188,000.
Rate Cut Odds: Softer-than-expected Nonfarm Payrolls data could increase the odds of rate cuts by the Federal Reserve. Traders expect 39 basis points of interest rate cuts by the end of 2024, according to data from the Chicago Board of Trade (CBOT).
CME FedWatch Tool: Currently, traders are pricing in a 57% chance of a rate cut in September.
US Core PCE Index: Last week, the US Core Personal Consumption Expenditure Price Index (PCE), the Fed’s preferred inflation gauge, stabilized, boosting hopes for potential rate cuts.
Gold’s rally extended after consolidating within the $2,320 to $2,360 region. Buyers breaking above the upper range boundary opened the door for further gains. Momentum remains in favor of buyers, as indicated by the Relative Strength Index (RSI).
Resistance Levels: If gold continues to strengthen, the next resistance levels are $2,400 and the year-to-date high of $2,450.
Support Levels: Conversely, if gold slips below $2,350, the next support would be the 50-day Simple Moving Average (SMA) at $2,337. Further down, the May 8 low of $2,303 and the May 3 cycle low of $2,277 serve as additional support levels.
