Gold surges to six-week high after dismal US jobs data

Gold rose more than 1% to $2,385, dragged down by mixed US NFP data and heightened speculation about a Federal Reserve rate cut.
June NFP data beat forecasts, but revisions for April and May point to an accelerating cooling in the labor market.
The U.S. Dollar Index (DXY) fell 0.16% to 104.95; the yield on the 10-year Treasury note fell more than six basis points to 4.284%.

Gold rose in the mid-North American session following the release of the US Nonfarm Payrolls (NFP) report for June, which beat expectations, but two previous downward revisions in the previous two months suggested the labor market was cooling faster than the data showed. That’s why investors are betting that the Federal Reserve (Fed) will cut interest rates in September, increasing the headwind for the US dollar and the tailwind for the yellow metal.

The XAU/USD pair is trading at $2,391, up over 1.40% on the day and over 2.70% on the week, after rebounding from intraday lows of $2,349, partly due to a weakening US dollar which continues to be dragged down by lower US Treasury yields.

The US Dollar Index (DX) is down 0.16% to 104.95, while the yield on the 10-year US Treasury note is down more than six basis points (bps) to 4.284%.

US NFP for June was positive, but April and May data were revised down, suggesting the economy added 111,000 fewer jobs than reported in those two months. As a result, the unemployment rate rose by a tenth in June, above consensus.

Other data from the U.S. Bureau of Labor Statistics (BLS) revealed that average hourly earnings (AHE) remained unchanged month over month but declined year over year.

In addition, geopolitics continued to play a major role in the path of the gold metal. Israeli Prime Minister Benjamin Netanyahu sent a delegation to continue hostage negotiations and reiterated that the war would not end until Israel achieved all of its goals. Meanwhile, the Hamas leader said they were waiting for a positive response from Israel to begin negotiations on the details of the deal, according to CNN.

Daily Market Factors Review: Gold Price Rises After US NFP

U.S. nonfarm payrolls rose by 206,000, topping estimates of 190,000, but April and May figures were revised down to 108,000 and 218,000, respectively.
Average hourly earnings (AHE) fell from 4.1% to 3.9% year-on-year, in line with expectations, while the unemployment rate rose from 4% to 4.1%.
On Wednesday, the Federal Open Market Committee (FOMC) released minutes from its June meeting that showed most participants assessed current policy as restrictive but left the door open to interest rate hikes. Policymakers acknowledged that the economy was cooling and could respond to unexpected economic weakness.
The probability of the Federal Reserve cutting interest rates by 25 basis points in September is 70%, up from 66% on Thursday, according to the CME FedWatch Tool.
The December 2024 federal funds rate futures contract implies the Fed will ease policy by 40 basis points (bps) by the end of the year.

Technical Analysis: Gold Price Breaks Head and Shoulders Neck Line, Heads for $2,400

Gold price has decisively broken the head and shoulders line, pushing spot prices close to $2,390, which indicates that bulls are in control of gold and that prices will rise in the future.

Momentum has shifted in favor of buyers as indicated by the bullish Relative Strength Index (RSI). A daily close above the June 21 high of $2,368 could open the door to a higher trading range in the $2,370-$2,400 area with buyers targeting higher prices.

If the price breaks through $2,400, it will go above this year’s high of $2,450 and then above $2,500.

On the other hand, if sellers push the spot price below $2350, further declines could reach $2300. If this support fails, the next demand zone will be the May 3 low of $2277, followed by the March 21 high of $2222.