Gold rebounds above $4,100 despite strong US NFP data
- Gold price rebounds to around $4,100 in Monday’s early Asian session.
- US midterm elections fuel hopes for an end to Iran war.
- US NFP rose more than expected in October.
Gold price (XAU/USD) recovers some lost ground to near $4,100 during the early Asian trading hours on Monday. Speculations that incoming Democrats would push to end the Iran war lift the yellow metal.
Bloomberg reported that Democrats, who secured majorities in both the House and Senate, are strongly opposing US President Donald Trump’s proposed $1.5 trillion defense budget and appear determined to prevent its passage.
A source familiar with the discussions indicated that Democrats are likely to only approve a defense budget figure around $1 trillion. They are anxious not to be seen approving continued funding for the war against Iran.
However, the potential upside for the precious metal might be capped, as the upbeat US jobs data could boost the US Dollar (USD) and Treasury yield. The US economy added 165,000 jobs in October, compared to 60,000 recorded in September, the US Bureau of Labor Statistics (BLS) reported on Friday. This figure beated the estimates of 65,000. The Unemployment Rate fell to 4.1% in October, down from 4.2% in September.
Stronger-than-expected US payrolls data reinforced expectations that the Federal Reserve (Fed) could keep interest rates higher for longer. Higher interest rates increase the opportunity cost of holding non-yielding gold, making gold less attractive to investors.
Traders currently see around 79.6% odds that the Fed will raise rates in December, compared with 72.8% before the US jobs report, according to the CME FedWatch tool.
"Gold gapped lower on a stellar employment report (that was) strong across the board, but is trying to claw back higher. This is a litmus test for this week's rally," independent metals trader Tai Wong said.
Gold consolidates as equity selloff tests safe-haven appeal
Analysts at OCBC note that gold “pared earlier gains after rising to a two-week high above 4140 at one point overnight,” with the subsequent rebound in oil prices and some stabilisation in the Dollar limiting further upside momentum, even as “softer US Treasury yields continued to lend support.” They flag that “the deepening selloff in AI and semiconductor stocks warrants some near-term caution,” warning that “should equity weakness trigger broader deleveraging, gold may not be spared from liquidity-driven selling as investors raise cash.”
That said, OCBC highlights that “gold’s relative resilience despite the sharp equity selloff is encouraging.” In their view, “following the recent correction and reduction in speculative positioning, gold may be gradually regaining some of its safe-haven appeal, potentially providing shelter amid turbulence elsewhere in financial markets,” though “the extent to which gold can hold up if equity weakness persists will be an important test.”
Into the near-term data calendar, OCBC expects “some consolidation remains likely ahead of US payrolls report tonight.” They argue that “softer employment data could further temper Fed tightening expectations, weigh on yields and USD, and allow gold’s recovery to extend,” with “next Tuesday’s US CPI” flagged as “another key test, while oil prices remain an important driver of inflation and rate expectations.” Technically, they note that “gold last seen at 4088 levels,” with “daily momentum turned mild bullish but rise in RSI moderated,” and judge that “consolidation [is] likely after the recent sharp rebound.”
Technical Analysis: Gold remains capped below the 100-day SMA
In the daily chart, XAU/USD remains capped in a broadly bearish near-term setting, with spot still below the 100-day simple moving average (SMA). Price holds modestly above the 20-day Bollinger band middle line, suggesting some underlying demand, but the proximity of the upper band highlights a dense overhead barrier. The Relative Strength Index (RSI) at 50.30 sits around neutral, hinting that the latest bounce lacks decisive momentum to challenge the prevailing topside resistance structure.
On the topside, immediate resistance is located at the 100-day SMA at $4,200, followed by the Bollinger upper band around $4,225, which together define the zone that bulls would need to reclaim to ease the current bearish bias. On the downside, initial support is offered by the current price region around $4,095, with the Bollinger middle band at $4,065 underpinning the short-term range; a deeper slide would expose the lower band support near $3,900, where sellers could become more cautious.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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