Gold Price Soars on Rate Cut Expectations, Jobs Data

Gold prices have been rising due to expectations for US rate cuts, geopolitical tensions, and China’s economic woes. Gold futures rose 1.04% to $2,182.55 per ounce at the time of writing, reflecting bullish sentiment in the gold market.

The Chinese central bank’s gold purchases as well as the country’s domestic market also contributed to gold’s leap. Gold prices are expected to trade higher this year as safe-haven demand remains supportive amid geopolitical uncertainty with ongoing wars and the upcoming US election in November, according to analysts.

The Gold Index, XAU/USD, rallied to a fresh all-time high above $2,180 in Friday’s early New York session as yields on 10-year US bonds fell to 4.04% after the US NFP data.

A sharp slowdown in wage growth and a higher Unemployment Rate is expected to prompt market expectations for the Fed to cut interest rates in the June policy meeting. The United States Bureau of Labour Statistics reported that the Unemployment Rate rose to 3.9% compared to expectations, and the former reading was 3.7%.

However, the NFP print for February was higher at 275K against expectations of 200K but remained lower than the prior reading of 353K.

Inflation outlook is expected to cool down as Average Hourly Earnings grew slower than market participants anticipated. Monthly wages grew slightly by 0.1% against a 0.6% increase in January, while annual wage growth decelerated to 4.3% from expectations and a prior reading of 4.4%. Slower wage growth and a high jobless rate have elevated selling pressure on the US Dollar.

In the European session, the precious metal exhibited strength as Fed Chair Jerome Powell indicated the central bank is close to gaining evidence for inflation returning sustainably to the 2% target. In his two-day testimony before Congress, Powell said policymakers are not far from gaining confidence that inflation will return to the 2% target and recognized the need to dial back the restrictive monetary policy stance to prevent the economy from falling into a recession.

Technically; gold price has refreshed its all-time highs above $2,180 after breaking above the horizontal resistance line plotted from December 4 high near $2,145. The gold price is trading in unchartered territory and is expected to remain broadly bullish. However, a corrective move in the asset cannot be ruled out as momentum oscillators have reached overbought territory. On the downside, December 4 high near $2,145 and December 28 high at $2,088 will act as major support levels.