Gold advances to near seven-week highs amid US labor market cooling
- Gold price climbs to near seven-week highs in Wednesday’s Asian session.
- A continued cooling in the US labor market weighs on the US Dollar and lifts Gold price.
- Traders will take more cues from the Fedspeak on Wednesday ahead of the key US inflation reports.
Gold price (XAU/USD) extends its upside to near seven-week highs above $4,300 during the Asian trading hours on Wednesday. The precious metal gains momentum as the US labor market remains relatively resilient but shows signs of slowing. The mixed US employment report for November reinforces bets of further rate cuts by the US Federal Reserve (Fed) and weighs on the US Dollar (USD). Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
The US central bank delivered its third 25-basis-point rate cut at the December policy meeting last week. However, Fed policymakers are divided on whether additional rate cuts are needed in 2026. The median Fed official penciled in just one reduction next year, but some policymakers see no further cuts. Traders await the Fedspeak later on Wednesday. New York Fed President John Williams and Atlanta Fed President Raphael Bostic are set to speak. Any hawkish comments from policymakers could lift the Greenback and undermine the USD-denominated commodity price in the near term.
Looking ahead, the US November Consumer Price Index (CPI) inflation data will be in the spotlight on Thursday. The Personal Consumption Expenditures (PCE) Price Index will be published on Friday. These reports could shape expectations for Fed rate cuts.
Daily Digest Market Movers: Gold rises amid slowing trend in the US labor market
- The US Nonfarm Payrolls (NFP) rose by 64,000 in November after falling by 105,000 in October, according to the US Bureau of Labor Statistics (BLS) on Tuesday. This reading came in stronger than the market expectation for an increase of 50,000.
- The Unemployment Rate in the US ticked higher to 4.6% in November from 4.4% in October. The Average Hourly Earnings increased 0.1% MoM in November after jumping 0.4% in the previous month.
- US Retail Sales were unexpectedly flat in October, following a downwardly revised 0.1% gain in September, the US Census Bureau showed on Tuesday. This figure came in below the consensus of 0.1%.
- US President Donald Trump is set to interview Fed Governor Christopher Waller on Wednesday for the next Fed Chair, according to people familiar with that matter, per the Wall Street Journal.
- Markets anticipate two rate cuts next year. Fed funds futures are pricing an implied 75.6% chance of a hold in rates at the US central bank's next meeting in January, up from nearly 70% a week ago, according to the CME FedWatch tool.
Gold’s long-term technical outlook remains bullish
Gold trades in positive territory on the day. According to the four-hour chart, the positive view of the precious metal remains intact, with the price being well-supported above the key 100-day Exponential Moving Average. Furthermore, the Bollinger Bands widen and the 14-day Relative Strength Index (RSI) is located above the midline, displaying the bullish momentum in the near term.
Sustained trading above the upper boundary of the Bollinger Band of $4,305, XAU/USD could be gearing up for another run at the December 15 high of $4,350. Any follow-through buying above this level could even open the door to retest an all-time high of $4,381.
On the flip side, a string of red candles could set the tone for a bearish run, with the first support level to watch at the December 16 low of $4,271. The next contention level is seen at the 100-day EMA of $4,220.
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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