Gold is rising unfazed by mighty US employment data ahead of the CPI

Gold rebounds 0.69% despite mighty US job gains, challenging the Fed’s rate cut path.
Gold is recovering from a decline in labor reports as investors weigh the Fed’s cautious stance on disinflation.
Upcoming US Inflation and Retail Sales Data Will Impact Gold’s Trajectory, Fed Policy.

The price of gold rebounded from intraday lows on Friday, extending its rally for a fourth straight day as investors shrugged off a mighty United States (US) nonfarm payrolls report. This eased the Federal Reserve’s (Fed) concerns about the labor market, but not as much as some officials admitted. The XAU/USD rate is USD 2,687, up 0.69%.

The value of bullion fell sharply after the U.S. Bureau of Labor Statistics (BLS) revealed that the economy added an extraordinary number of people to the labor force, surpassing 200,000. As a result, the unemployment rate fell while investors priced in fewer interest rate cuts based on the fact that the economy continued to create enough jobs while the disinflation process “halted,” according to the latest Fed minutes.

Nevertheless, XAU/USD recovered as market participants digested the data. The data assured Fed officials that the labor market remains vigorous as it battles inflation, which recently surged after the U.S. central bank cut interest rates by 100 basis points in 2024.

According to the US Dollar Index (DXY), the US dollar surged to multi-month highs. DXY reached 109.96 before paring gains and now stands at 109.68, up 0.49%. U.S. Treasury yields have risen, although plateaued, especially on the belly of the curve.

Chicago Fed President Austan Goolsbee said they weren’t complaining because the economy had created more than 250,000 jobs. jobs. He said the labor market appears stable “at full employment,” adding that if conditions are stable and there is no raise in inflation, “rates should fall.”

In this situation, investors’ attention will focus on next week’s data. The U.S. schedule will include producer and consumer inflation data, as well as retail sales and jobless claims for the week ending January 11.

Daily summary of market movements: gold price raise combined with the US dollar

The gold price shrugs off higher U.S. real yields, which rose two basis points to 2.30%. At the same time, the US 10-year Treasury yield rose seven and a half basis points to 4.767%.
The U.S. Bureau of Labor Statistics (BLS) revealed that the economy added 256,000 jobs last month. jobs, although November was revised down from 227,000. up to 212 thousand The consensus was that the workforce would be expanded by 160,000. people, with private employment totaling 223 thousand.
The unemployment rate dropped to 4.1% and the average hourly wage (AHE) dropped from 4% to 3.9%. Following the data release, investors expect the Federal Reserve to cut interest rates only once in 2025.
The Federal Reserve’s moderating expectations continued to decline. The December Fed Funds futures contract is pricing in a 30 basis point easing of monetary policy.
US consumer sentiment reported in January by the University of Michigan (UoM) exceeded estimates of 73.8 and fell to 73.2. Inflation expectations for one year increased by 3.3% from 2.8%, and for five years from 3% to 3.3%.
On Thursday, Fed Governor Michelle Bowman maintained a hawkish stance, saying the central bank should be cautious when adjusting interest rates, while Jeffrey Schmid of the Kansas City Fed added that rates were “almost” neutral.
Earlier, Philadelphia Fed representative Patrick Harker revealed that the US central bank may hold off due to uncertainty, while Susan Collins from Boston said that the current outlook suggests a gradual approach to interest rate cuts.

XAU/USD Technical Outlook: Gold price rises above $2,650 as bulls emerge

Gold’s uptrend continues as the yellow metal carved out another series of higher highs and higher lows, with investors eyeing the $2,700 mark. The momentum is heavily tilted to the upside as seen in the Relative Strength Index (RSI) which shows the bulls are dominating.

If XAU/USD clears from $2,700, the next resistance will be the December 12 high of $2,726 and the all-time high (ATH) of $2,790.

Conversely, a move below $2,650 will challenge the 50- and 100-day uncomplicated moving averages (SMAs) at $2,645 and $2,632, respectively. If it weakens further, the next upside would be $2,600, ahead of the 200-day SMA at $2,503.