Gold prices rebound on pessimistic NFP data, weak US dollar
- Gold prices are attracting some buyers on Monday amid USD weakness.
- Gold prices rose as expectations grew that the Federal Reserve will begin cutting interest rates later this year.
- Easing Middle East tensions and risk sentiment could limit gold’s upside.
Gold prices (XAU/USD) fell for a second straight day in the Asian session on Monday. A weaker-than-expected US jobs report raised the possibility of a September interest rate cut by the US Federal Reserve. This ultimately caused the US dollar (USD) to fall and USD-denominated gold to rise. It is worth noting that lower interest rates may reduce the opportunity cost of investing in gold, which could lead to higher demand and prices.
On the other hand, easing geopolitical tensions in the Middle East, particularly the Iran-Israel conflict and concerns about the risk environment, could weaken demand for safe-haven assets and limit the yellow metal’s upside. Gold traders will be watching Fedspeak this week. The Fed’s Thomas Barkin and John Williams are scheduled to speak on Monday. A dovish message from Fed officials could push XAU/USD further.
Daily Digest Market Movers: Gold prices recovered some of their losses amid falling US data.
- US nonfarm payrolls (NFP) increased 175K in April from 315K in March (revised from 303K), missing market expectations of 243K.
- The unemployment rate in April rose from 3.8% in the previous month to 3.9%, and the average hourly wage fell from 4.1% in March to 3.9% in April.
- The US ISM Service PMI entered contraction territory, falling from 51.4 in March to 49.4 in April. This was below market estimates of 52.0.
- Federal Reserve President Michel Bauman warned there was a real risk that inflation could rise for longer than many people expect, adding that the Fed would be willing to raise interest rates if inflation stagnates or reverses.
- Chicago Fed Austan Goolsbee said the latest U.S. jobs report was solid, emphasizing that current monetary policy remains restrictive.
- Expectations of Fed easing have been adjusted, raising the odds of a September rate cut from 55% higher than in the NFP report to nearly 90%, according to the CME FedWatch tool.
Technical Analysis: Gold price is trapped within a near-term downtrend channel.
On this day, the price of gold showed strength. The bullish outlook for the precious metal remains intact as XAU/USD is above the key 100-day exponential moving average (EMA) on the daily chart.
In the short term, gold prices have remained within a downtrend channel since mid-April, suggesting further consolidation cannot be ruled out. Additionally, the 14-day Relative Strength Index (RSI) is hovering around the 50 midline, indicating indecision among market participants.
The first upside barrier for the yellow metal will appear near the 100-EMA at $2,318. A decisive break above the mentioned levels would resume the positive outlook in the near term. The next hurdle is the $2,350-$2,355 area, which marks the confluence of the April 26 high and the upper boundary of the downtrend channel. A bullish break above this level would expose the $2,400 mark to all-time highs near $2,432.
The downside is that a subsequent sell-off below the psychological $2,300 would take the price down to the May 3 low and $2,275, the lower limit of the downtrend channel. Further south, the next contention level is located at the April 1 low at $2,228, followed by $2,200.
US dollar price today
The table below shows the percentage change of the United States Dollar (USD) against major currencies listed today. The US dollar was the weakest against the euro.
| USD | EUR | GBP | cad | AUD | yen | new zealand dollar | Swiss Franc | |
| USD | -0.05% | -0.02% | -0.03% | -0.02% | 0.28% | 0.18% | 0.03% | |
| EUR | 0.04% | 0.02% | 0.02% | 0.03% | 0.31% | 0.22% | 0.07% | |
| GBP | 0.00% | -0.02% | -0.01% | -0.01% | 0.28% | 0.20% | 0.04% | |
| cad | 0.04% | -0.01% | 0.01% | 0.02% | 0.32% | 0.21% | 0.06% | |
| AUD | 0.03% | -0.01% | 0.02% | 0.01% | 0.31% | 0.21% | 0.07% | |
| yen | -0.28% | -0.30% | -0.27% | -0.29% | -0.26% | -0.05% | -0.25% | |
| new zealand dollar | -0.17% | -0.22% | -0.20% | -0.21% | -0.21% | 0.10% | -0.15% | |
| Swiss Franc | -0.04% | -0.06% | -0.05% | -0.06% | -0.04% | 0.26% | 0.15% |
Heatmap shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euro in the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents EUR (base)/JPY (quote).
Gold FAQ
Gold has played an important role in human history, being widely used as a store of value and medium of exchange. Nowadays, in addition to being polished and used as jewelry, precious metals are widely viewed as safe assets and are considered good investments during turbulent times. Gold is also widely known as a hedge against inflation and currency depreciation because it is not dependent on a specific issuer or government.
Central banks are the largest holders of gold. With the aim of supporting their currencies during times of turmoil, central banks tend to diversify their reserves and purchase gold to improve the strength of their economy and currency. High gold reserves can be a source of confidence in a country’s solvency. Central banks added 1,136 tonnes of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase since records began. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US Treasury bonds, which are major reserve and safe haven assets. When the dollar falls, gold prices tend to rise, allowing investors and central banks to diversify their holdings during turbulent times. Gold also has an inverse correlation with risky assets. Rising stock markets tend to weaken gold prices, while sell-offs in riskier markets tend to favor the precious metal.
Prices may fluctuate due to a variety of factors. Fears of geopolitical instability or a severe recession could cause gold prices to rise quickly due to its safe haven status. Gold, a non-yielding asset, tends to appreciate when interest rates are low, while higher money costs generally weigh on the yellow metal. Nonetheless, most of the movement will depend on how the US dollar (USD) behaves when the asset is priced in dollars (XAU/USD). A stronger dollar tends to keep gold prices in check, while a weaker dollar is likely to push gold prices higher.
Source: https://www.fxstreet.com/news/gold-price-rebounds-on-downbeat-nfp-data-softer-us-dollar-202405060411
