Gold gathers strength towards fresh two-week top, eyes on US NFP data
- Gold price attracts some buyers to fresh two-week highs in Friday’s early European session.
- Traders prefer to wait for the US NFP report before positioning for the near-term trajectory.
- Fed rate cut bets are keeping the US bond yields and the USD depressed, lending some support.
Gold price (XAU/USD) extends the rally and reaches fresh two-week highs during the early European trading hours on Friday. Investors now opt to move to the sidelines and wait for the release of the closely-watched monthly employment details from the United States (US). The popularly known Nonfarm Payrolls (NFP) report will play a key role in influencing the Federal Reserve’s (Fed) future policy decisions, which, in turn, should provide a fresh impetus to the non-yielding yellow metal.
Heading into the key data risk, rising bets for an imminent interest rate cut by the Fed in September, bolstered by the incoming softer US macro data, might continue to act as a tailwind for the Gold price. Furthermore, dovish Fed expectations keep the US Treasury bond yields and the US Dollar (USD) depressed near a multi-week low, which should further contribute to limiting the downside for the commodity. Apart from this, geopolitical tensions stemming from conflicts in the Middle East suggest that the path of least resistance for the XAU/USD is to the upside.
Daily Digest Market Movers: Gold price bulls turn cautious ahead of the key US jobs report
- Growing acceptance that the Federal Reserve will start cutting interest rates later this year amid signs of a slowdown in the US economy continues to lend some support to the non-yielding Gold price.
- The US Department of Labor (DoL) reported on Thursday that the number of Americans applying for unemployment insurance benefits increased more than expected by 229K in the week ending June 1.
- This, along with Wednesday’s ADP report on private-sector employment, suggests that the US labor market is cooling, cementing bets for a September Fed rate cut and weighing on the US Treasury bond yields.
- The yield on the benchmark 10-year US government bond languishes near its lowest level in two months, which, in turn, is seen undermining the US Dollar and acting as a tailwind for the yellow metal.
- The underlying strong bullish sentiment across the global equity markets might hold back traders from positioning for any further gains ahead of the release of the crucial US monthly employment details.
- The popularly known Nonfarm Payrolls (NFP) report is expected to show that the US economy added 185K jobs in May as compared to 175K previous and the unemployment rate held steady at 3.9%.
- Apart from this, Average Hourly Earnings will influence the inflation trajectory and the Fed’s future policy decision, which, in turn, will help in determining the next leg of a directional move for the XAU/USD.
Technical Analysis: Gold price is likely to confront stiff resistance near the $2,400 round-figure mark
From a technical perspective, Thursday’s sustained move beyond the $2,364 area, or last week’s swing high, was seen as a fresh trigger for bullish traders. That said, mixed oscillators on the daily chart warrant some caution before positioning for any further gains. Hence, any subsequent move up is more likely to confront stiff resistance and remain capped near the $2,400 mark. Some follow-through buying, however, has the potential to lift the Gold price to the next relevant hurdle near the $2,425 zone en route to the $2,450 region, or the all-time peak touched in May.
On the flip side, the $2,060 horizontal zone now seems to protect the immediate downside. Any further decline might be seen as a buying opportunity around the $2,340 region. This should help limit the downside for the Gold price near the $2,315-2,314 area or the multi-week low touched on Tuesday. A convincing break below, however, will confirm a breakdown through the 50-day Simple Moving Average (SMA) and pave the way for deeper losses. The XAU/USD might then weaken further below the $2,300 round-figure mark and test the $2,280 support zone.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.57% | -0.49% | -0.13% | -0.68% | -0.85% | -1.35% | -1.54% | |
| EUR | 0.59% | 0.09% | 0.45% | -0.08% | -0.26% | -0.75% | -0.95% | |
| GBP | 0.48% | -0.10% | 0.36% | -0.18% | -0.36% | -0.85% | -1.05% | |
| CAD | 0.13% | -0.46% | -0.36% | -0.54% | -0.72% | -1.21% | -1.41% | |
| AUD | 0.66% | 0.06% | 0.18% | 0.52% | -0.19% | -0.68% | -0.87% | |
| JPY | 0.85% | 0.26% | 0.35% | 0.71% | 0.18% | -0.48% | -0.69% | |
| NZD | 1.29% | 0.73% | 0.83% | 1.17% | 0.65% | 0.46% | -0.21% | |
| CHF | 1.50% | 0.93% | 1.03% | 1.38% | 0.87% | 0.66% | 0.21% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Employment FAQs
Labor market conditions are a key element in assessing the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels because low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given their significance as a gauge of the health of the economy and their direct relationship to inflation.