- Gold is falling sharply after failing to break through resistance at $2,531 to close at $2,493 on rising speculation about a Federal Reserve rate cut.
- US nonfarm payrolls fell brief of expectations, but improved data and rising hourly wages raised uncertainty about a 25- or 50-basis-point cut.
- Despite the fall in Treasury yields, the US dollar index rebounded above 101.00, putting further pressure on gold prices.
Gold retreated after failing to test an all-time high of $2,531 and falling more than 0.80% tardy in the North American session. US economic data casts doubt on a 50- or 25-basis-point (bps) rate cut by the Federal Reserve (Fed) at its September meeting. XAU/USD is trading at $2,493 after hitting a high of $2,529.
The U.S. Bureau of Labor Statistics (BLS) revealed that the number of nonfarm payroll workers (NFP) in August missed estimates but improved from July’s downwardly revised number. A deeper look at the report showed that the unemployment rate fell from the previous month, while average hourly earnings rose.
According to the data, the probability of Fed interest rates has fluctuated wildly. At one point, traders were pricing in a 50bp cut, with the odds rising to 70%. However, when the dust settled, market participants estimated a 25bp cut as more likely, with the odds rising to 73%, while the odds of a 50bp cut had fallen to 27%.
Meanwhile, Federal Reserve policymakers have been going through the news cycle. New York Fed President John Williams said a rate cut would soon aid keep the labor market in balance. Federal Reserve Governor Christopher Waller echoed some of Waller’s comments in a speech at the University of Notre Dame. He said “the time has come” to start easing policy and said he was open to any amount of easing.
Recently, Chicago Federal Reserve President Austan Goolsbee took a dovish stance, saying policymakers “overwhelmingly” agree on the need to lower borrowing costs.
Given all these events, gold prices have fallen even as US Treasury yields have fallen. The Greenback recently recovered from a drop below 101.00 and gained more than 0.15%, as shown by the US Dollar Index (DXY), which rose to 101.22.
In the geopolitical space, US Secretary of State Antony Blinken said: “90% of the ceasefire agreement in Gaza has been reached, but there are still critical issues where there are gaps; it is the responsibility of both sides to reach agreement on the remaining issues,” via Reuters.
Daily Market Factors Review: Gold price falls as investors ignore mixed US jobs report
- US NFP rose by 142k in August, missing the forecast of 160k. In addition, July’s data was revised down from 114k to 89k.
- The unemployment rate fell from 4.3% to 4.2%, while average hourly earnings rose from 3.6% to 3.8% year-on-year in August.
- Data from the Chicago Board of Trade show the Federal Reserve is expected to cut interest rates by at least 104 basis points (bps) this year, down from 103 bps a day earlier, based on the December 2024 federal funds rate futures contract.
Technical Outlook: Gold Price Falls Below $2,500 on USD Strength
Gold prices remain bullish but appear to be turning negative in the brief term. After XAU/USD reached an intraday high above $2,520, it reversed course and formed a bearish enfilding candlestick pattern that opened the door for additional losses.
Momentum has turned bearish, as indicated by the Relative Strength Index (RSI). The RSI is on the verge of breaking through its neutral level.
If XAU/USD breaks below the August 22 low at $2,470, it will open the door for further declines. The next demand zone will be the confluence of the April 12 high, which became support, and the 50-day uncomplicated moving average (SMA) between $2,435 and $2,431.
On the other hand, if buyers push prices above $2,500, the next resistance will be the yearly high at $2,531. If it is breached, the next stop will be the psychological level of $2,550 and then the $2,600 level.
