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Gold prices pushed higher during the North American session as the likelihood of a 50 basis point (bps) rate decrease by the Federal Reserve increased due to the US’s weaker-than-expected jobs statistics. In addition, the yield on US Treasury bonds decreased, which hurt the US dollar, which has an inverse relationship with gold. As a result, the USD/XAU trades at $2493, up just a tiny 0.05%.
US JOLTS Data Fuels Rate Cut Expectations
In the few previous hours, XAU/USD increased by 0.05% to approximately $2493, as prices recovered from a daily low of $2471. A less robust-than-anticipated US JOLTS report feeds the rumor of a September 50 basis point Fed rate decrease. Gold is supported by declining US Treasury yields and a weaker US dollar, even though profit-taking was erratic during the session.
Through the JOLTS report, the US BLS disclosed that the quantity of job vacancies in July plummeted in comparison to the downwardly corrected June data. There were 7.673 million vacancies instead of 7.910 million. In other data, July’s Factory Orders shattered June’s -.3.3% decline and beyond predictions of 4.7%, rising swiftly to 5%. Although it improved, US manufacturing business activity was still in contractionary area.
Due mostly to traders booking gains, gold prices have been swaying throughout the day, pushing the metal down to a daily low of $2,471. Gold recently gained some ground when the US Bureau of Labour Statistics (BLS) released the results of its most recent Jobs and Labour Turnover Survey (JOLTS), which showed that the number of open positions had fallen to the lowest level since January 2021.
Declining Treasury Yields and Weaker Dollar Support Gold
Following the release of the data, traders increased their wagers that the Fed could aggressively decrease interest rates due to fears that they are behind the curve. This is demonstrated by the yield on the 10-year benchmark note, which is down over six basis points to 3.776%.
The next Federal Open Market Committee (FOMC) meeting is scheduled for September 17–18. Based on data from CME FedWatch Tool, the probability of a 50 basis point increase at the September meeting increased to 43%, which is nearly a coin flip.
The US Dollar Index (DXY), which measures how six different currencies perform in relation to the US dollar, fell 0.37% to 101.38 after rising over 1.30% over the previous six days and rebounding from a year-to-date (YTD) low.
Profit-Taking and Market Sentiment
Amid concerns of a US recession, market sentiment is still negative and is attributed to stock rotation. Regarding geopolitics, there is still discussion of a ceasefire in the Israel-Hamas conflict, but Russia’s invasion of Ukraine is still ongoing.
Gold traders are getting ready for more US job data in the interim, including the Nonfarm Payrolls (NFP) report, Initial Jobless Claims, and ADP National Employment Change.
Private hiring, revealed by the ADP National Employment Change report, is foreseen increasing from 122K in July to 150K in August. August’s NFP figures are expected to rise from 114K to 163K, while the Unemployment Rate could dip, according to the consensus, from 4.3% to 4.2%.
December 2024 Chicago Board of Trade (CBOT) fed funds future rates contract hints that investors are eyeing 106 basis points of Fed easing this year.
Technical Factors:
Gold price hovers around $2,500. Gold price uptrend resumed on Wednesday as a ‘tweezers bottom’ chart pattern emerges, yet buyers need to clear a key resistance level that could sponsor a re-test of the YTD high. Momentum, as measured by the Relative Strength Index (RSI), hints that buyers are in charge but turned flat in the near term.
If buyers achieve a daily close above $2,500, the next resistance would be the all-time high (ATH) at $2,531, followed by the $2,550 mark. A breach of the latter will expose $2,600.
Conversely, if XAU/USD stays below $2,500, the next support would be the August 22 low at $2,470. Once hurdled, the next demand zone would be the confluence of the April 12 high turned support and the 50-day Simple Moving Average (SMA) at around $2,431.
