The price of gold (XAU/USD) rose more than 1% on Friday as investors digested a softer-than-expected US jobs report, dampening hawkish sentiment despite higher inflation. At the time of writing, the XAU/USD pair is trading at $4,174, having rebounded from intraday lows of $4,121.
Bullion values ​​rise as gentle jobs data weighs on the dollar’s outlook
On Thursday, non-agricultural employment data in the US for June differed significantly from estimates and amounted to 57,000. instead of 110 thousand The unemployment rate decreased slightly, but mainly due to a lower unemployment rate, which reached 61.5, the lowest level since March 2021.
The swaps market immediately revised expectations for Federal Reserve (Fed) interest rates, with investors now expecting a slim 46% chance of a rate hike at the end of the year.
As a result, the dollar lost its value, as illustrated by the US dollar index (DXY), which will end the week with a loss of 0.52%. DXY, which measures the dollar’s performance against six currencies, remains at 100.83.
At the same time, the 10-year U.S. Treasury yield remains steady at 4.485%, adding to the appeal of the unalloyable metal as it performs well in lower interest rate scenarios.
New Fed Chairman Kevin Warsh did not provide future guidance but reaffirmed the Fed’s commitment to controlling inflation.
Investors will be closely monitoring FOMC minutes in the coming week, especially in anticipation of the US inflation report on July 14. Further data is expected, including the release of the ISM Services PMI and jobless claims numbers for the week ending July 4, which are expected to augment from 215,000 to 215,000. up to 219 thousand
Meanwhile, the World Gold Council said central banks returned to purchasing mode in May and, based on the latest reported data, official gold reserves increased by 41 net tonnes.
XAU/USD Technical Outlook: Gold Recovers $4,100 But Remains Bearish Below 200-SMA
Despite rising for the third day in a row, gold remains biased lower. According to the relative strength index (RSI), the momentum has changed to slightly bullish, short-term.
On the other hand, gold is poised to break the psychological mark of $4,200. Above this area, the next resistance is the downward resistance trendline around $4,225-$4,250 and then the $4,300 mark. The overhead is the 200-day uncomplicated moving average (SMA) at $4,402.
To sustain a bearish continuation, XAU/USD sellers need to bring spot prices below $4,100 before testing the psychological levels of $4,050 and $4,000. A breach of the latter will reveal the annual low at $3,941, down from $3,900.
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 operate 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 unthreatening 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 support 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. Despite this, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A robust dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
