Gold Price Falls as Mighty US NFP Suggests Modest Fed Rate Cuts

Gold falls after solid US jobs report, easing pressure on Fed.
The US 10-year Treasury yield rises to 3.971%, while the US dollar index hits a mid-August high of 102.58, limiting gold’s rally.
The geopolitical risk of Israel and Iran supporting gold could reach $2,700.

The gold price is rebounding after a stronger-than-expected U.S. jobs report suggested that the labor market remains solid and that the Federal Reserve (Fed) is likely to ease policy in 25-basis-point (bp) increments. At the time of writing, the XAU/USD rate is at $2,643, down 0.40%.

The U.S. Bureau of Labor Statistics (BLS) revealed that the labor market is not in a bad situation after an excellent September jobs report. The data eased pressure on the Fed, which cut borrowing costs by 0.50% at its September meeting amid concerns about meeting the U.S. central bank’s maximum employment mandate.

The unemployment rate fell by two tenths while average hourly earnings were mixed, with monthly readings falling while rising in the 12 months to September.

Traders reacted to the data by pushing the 10-year U.S. Treasury yield 12 basis points to 3.971%, a level last seen in mid-August 2024. This was one of the reasons that pushed gold prices back. The U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against a basket of six peers, also hit its highest level since mid-August at 102.58, up 0.63%.

The data confirmed a 25 bp cut in interest rates by the US central bank at the upcoming November meeting. In fact, a minimal percentage of investors expect the Fed to leave interest rates unchanged.

Next week, data on inflation, the number of unemployed people and consumer sentiment from the University of Michigan will be published in the US.

Chicago Fed President Austan Goolsbee, who will not vote in 2024 but is one of the most dovish members of the Federal Open Market Committee (FOMC), said more such reports would “increase my confidence that we will achieve full employment.” He said most Fed officials expect interest rates to decline “significantly” over the next 18 months.

Meanwhile, geopolitics will continue to limit the decline in bullion prices. An escalation of the conflict involving Hezbollah, Iran, Israel and the United States (US) would strengthen XAU/USD prices and open the door to a challenge to $2,700.

Daily market update: Gold price falls as US recession fears fade

The number of nonfarm payrolls in the US increased by 254,000 in September, exceeding the estimate of 140,000. and an upwardly adjusted amount of PLN 159,000. from August. The unemployment rate dropped from 4.2% to 4.1%, lower than expected.
Average hourly earnings in September increased by 0.4% m/m, compared to 0.5% in the previous month, but exceeded forecasts of 0.3%.
Earnings per hour rose 4% in the 12 months to September, above estimates and August, which were 3.8% and 3.9%, respectively.
Market participants shrugged off the Fed’s 50 basis point rate cut. According to CME FedWatch Tool data, the chance of a 25 basis point cut is 95%, and the chance of keeping rates unchanged is 5%.

XAU/USD Technical Analysis: Gold Price Falls Below $2,650, With Key Technical Level Below $2,600

The gold price strengthened around $2,640-$2,670 for the fifth consecutive day after the Relative Strength Index (RSI) moved out of overbought territory. Price action remains subdued while buyers lose momentum, opening the door to a pullback.

If XAU/USD reaches a daily close below $2,650, look for a decline towards the September 18 high support at $2,600. After giving up, the next area of demand will be the 50-day uncomplicated moving average (SMA) at $2,524.

Conversely, to maintain its bullish continuation, the XAU/USD pair needs to clear $2,670 to have a chance of breaking the year-to-date high of $2,685. Next will be the $2,700 level.