Gold (XAU/USD) attracted recent buyers during Thursday’s Asian session, following the previous day’s volatile price swings and a slow retreat from more than a week’s high. The US dollar (USD) is depreciating after Wednesday’s softer-than-expected US macro data, which is proving to be a key factor supporting the commodity for the second day in a row. However, increased expectations of an interest rate boost by the US Federal Reserve (Fed), combined with geopolitical risks, act as a tailwind and should keep bullion prices under control ahead of the US jobs release.
On Wednesday, Automatic Data Processing (ADP) reported that U.S. private sector employment rose by 98,000 in June, compared with the previous month’s unadjusted reading of 122,000. and a missing consensus estimate of 113,000. Moreover, the Institute for Supply Management (ISM) manufacturing PMI fell from 54 to 53.3 in June. In addition, the price index fell to 73 from 82.1 and the employment index rose to 49.7 from 48.6 in May. Moreover, the recent decline in oil prices has dramatically eased concerns about short-term inflation and is keeping dollar bulls on the defensive, which in turn is seen as a tailwind for the gold price.
Nevertheless, CME Group’s FedWatch tool indicates that investors continue to price in about a 64% chance that the U.S. central bank will raise borrowing costs in September and assign a nearly 85% probability of a move by the end of this year. The bets were confirmed in Wednesday’s statement by Fed Chairman Kevin Warsh, who said he would stick to his 2% inflation target, disappointing anyone expecting loose monetary policy despite President Donald Trump’s call for interest rate cuts. Moreover, several Fed officials have indicated that higher interest rates may be necessary to bring inflation back to the 2% target. This should limit USD losses and reduce unprofitable gold.
Meanwhile, Iran and the United States concluded a round of indirect talks in Qatar, with no signs that the two countries had made progress toward lasting peace amid tensions in the critical Strait of Hormuz. Separately, Russia fired a salvo of missiles and drones at Ukraine’s capital, Kiev, early Thursday morning. This keeps geopolitical risks in play and favors US dollar bulls as the focus remains on the release of the US Non-Farm Payrolls (NFP) report due later in the North American session. Key data remains a key driver of Fed monetary policy, which in turn should influence the dollar and assist investors determine the near-term trajectory of the gold price.
XAU/USD 4-hour chart
Gold must exceed 38.2% Fibo. level and 100-SMA on H4 to support the case for further gains
From a technical perspective, the overnight brief rally has tapered off near the 38.2% Fibonacci retracement level, a result of the recent decline seen over the last two weeks or so. Moreover, the XAU/USD pair remains below the 100-period elementary moving average (SMA), strengthening the short-term bearish bias.
However, momentum indicators are improving, with the Moving Average Convergence Divergence (MACD) rising above zero and the Relative Strength Index (RSI) remaining around 54. Additionally, acceptance is above the Fibo of 23.6%. Supports the case for additional recovery efforts that remain constrained by the dominant structure.
Meanwhile, immediate resistance is at the 38.2% Fibo level. at $4,112.32, followed by the 100-period SMA at $4,145.47 and the 50% retracement at $4,164.62. The next barriers were set at 61.8% at $4,216.91, 78.6% retracement at $4,291.37 and cycle high at $4,386.20.
On the other hand, initial support is seen at the recovered 23.6% retracement level at $4,047.62, while deeper declines would expose structural base around the swing low at $3,943.03.
(The technical analysis for this story was written with the assist of an AI tool.)
Gold FAQs
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, beyond its luster and apply in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies in turbulent times, central banks typically diversify their reserves and purchase gold to improve the perceived strength of the economy and currency. High gold reserves may provide a source of confidence in the country’s solvency. According to data from the World Gold Council, central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion. This is the highest annual purchase since registration began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US treasury bonds, which are both major reserve assets and safe and sound haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their holdings in turbulent times. Gold is also inversely correlated with risky assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets favor the precious metal.
The price may change due to many factors. Geopolitical instability or fear of a deep recession can quickly cause gold prices to rise due to its safe-haven status. Gold, as a non-yielding asset, tends to rise at lower interest rates, while the higher cost of money tends to weigh on the yellow metal. Still, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A forceful dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
