Gold Price Forecast: XAU/USD steadies, US employment data disappoints, Trump’s tax bill in focus
- Gold price steadies near $3,350 after a disappointing ADP report reflects weakness in the US labour market.
- The US Senate narrowly passes President Trump’s tax bill with the July 4 deadline in sight.
- XAU/USD threatens the 20-day SMA near $3,350 with bulls eager to retest $3,400.
Gold (XAU/USD) price is attempting to extend its recovery as traders digest Wednesday’s Automatic Data Processing (ADP) employment report.
With XAU/USD hovering near $3,350 at the time of writing, US President Trump's tax bill and interest rate expectations continue to drive demand for bullion.
The ADP Employment Change report for June showed that the private sector contracted in June.
Analysts had expected the June report to show that 95,000 jobs were added to the US private sector in May. Instead, a negative reading of 33K reflects potential weakness in the US labour market.
As a closely watched precursor to the Nonfarm Payrolls (NFP) report, the soft print has provided additional support for Gold.
As the Fed remains committed to monitoring the incoming employment and inflation data before reducing interest rates, this job report may influence the potential trajectory for interest rates.
On Tuesday, Fed Chair Jerome Powell stated at the European Central Bank (ECB) Forum on Central Banking in Sintra that "It's going to depend on the data, and we are going meeting by meeting." "I wouldn't take any meeting off the table or put it directly on the table. It's going to depend on how the data evolves,” Powell added.
These comments suggest that the Fed is not rushing to cut rates, increasing the potential for a September interest rate cut.
Gold daily digest market movers: XAU/USD trades steady as the House of Representatives votes on Trump’s tax bill
- At the same time, the US President Donald Trump administration’s proposed “Big Beautiful Bill,” with its estimated $3.3 trillion impact on the deficit, passed the Senate.
- The House of Representatives is expected to vote on the bill on Wednesday. The Republican apathy is pushing to pass the bill by Friday, July 4.
- The bill has drawn fire from across the political spectrum, including from Elon Musk and several Democratic leaders, who warn it could lead to inflation and a weaker US Dollar (USD). Such a backdrop often prompts investors to turn to Gold as a hedge against instability and currency depreciation.
- The ISM Manufacturing Purchasing Manufacturing Index (PMI), released on Tuesday, rose to 49 in June, higher than the estimated 48.8.
- Additionally, the Job Opening Labour Survey (JOLTS) report released on Tuesday showed that 7.769 million vacancies in the US were available in the last day of May. This beat the estimate of 7.3 million.
- The ECB Forum on Central Banking continues in Sintra, Portugal. ECB President Christine Lagarde, Bank of Japan (BoJ) Governor Kazuo Ueda, Bank of England Governor Andrew Bailey, and Federal Reserve Chair Jerome Powell are discussing Central Banking policy.
- Inflation and interest rates have remained top priorities in discussions. Comments from the meeting may continue to drive interest rate expectations. Prospects of rate cuts could boost demand for non-yielding assets such as Gold.
- Nonfarm Payrolls on Thursday is expected to decrease to 110,000 in June from 139,000 in May. The Unemployment Rate is expected to rise to 4.3% from 4.2%. Increases in unemployment may raise expectations of interest rate cuts, which is supportive of non-yielding assets, such as Gold.
- With a July 9 tariff deadline fast approaching, the US is focusing on smaller, step-by-step trade deals rather than sweeping agreements, aiming to avoid triggering new tariffs. While partial progress has been made with countries such as the UK and China, talks with Japan and the European Union remain unsettled. The EU has shown openness to a blanket 10% tariff but is pushing for exceptions in sensitive sectors such as semiconductors and pharmaceuticals.
Gold technical analysis: XAU/USD clings to the 20-day SMA
Gold is trading near the $3,350 psychological level, aligning with the 20-day Simple Moving Average (SMA).
The 23.6% Fibonacci retracement level of the April low to the April high move provides resistance at $3,371. A move higher and a break of wedge resistance could push XAU/USD to the $3,400 psychological level, opening the door for the June high of $3,452.
Gold (XAU/USD) daily chart
The Relative Strength Index (RSI) is nearing 52 at the time of writing, suggesting that momentum remains close to neutral levels.
On the downside, the 50-day SMA provides near-term support at $3,321. Below that is the round number of $3,300 and the 50% Fibonacci retracement of the April move at $3,229.
A move below could bring the May low of $3,120 mark into play.
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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