Gold price edges higher as bears turn cautious ahead of the key US jobs data
- Gold price gains positive traction and moves away from a two-week low set on Thursday.
- Subdued USD price action lends support to the XAU/USD pair ahead of the US NFP report.
- The optimism over possible US-China trade negotiations might cap the precious metal.
Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Friday and looks to build on the overnight bounce from the $3,200 neighborhood, or over a two-week low. The uptick could be attributed to some repositioning trade ahead of the release of the closely-watched US Nonfarm Payrolls (NFP) report later today. The crucial jobs data could provide a fresh insight into the Federal Reserve's (Fed) policy outlook, which, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide a fresh impetus to the non-yielding yellow metal.
Heading into the key data risk, signs of a potential de-escalation in the trade war between the US and China – the world's two largest economies – might continue to act as a headwind for the safe-haven Gold price. Meanwhile, the USD sits near a three-week high touched on Thursday and might further contribute to capping the upside for the commodity. Hence, it will be prudent to wait for strong follow-through buying before confirming that the XAU/USD pair's corrective slide from the $3,500 mark, or the all-time peak has run its course and positioning for any further gains.
Daily Digest Market Movers: Gold price might struggle to capitalize on hopes for a US-China trade deal
- China's Commerce Ministry said on Friday that the US has recently, through relevant channels, actively conveyed messages to engage in talks on tariff issues and the country is assessing the proposal to start negotiations. This adds to the optimism over a possible easing of the tit-for-tat tariff war between the world’s two largest economies.
- Moreover, hopes for tariff deals between the US and its trading partners lifted the US Dollar to a three-week high and dragged the Gold price to the $3,200 neighborhood on Thursday. The USD bulls, however, turn cautious amid bets for more aggressive policy easing by the Federal Reserve and ahead of the US Nonfarm Payrolls report.
- Traders ramped up their bets that the US central bank will deliver four quarter-point rate reductions by the year-end after data released this week showed that the US economy unexpectedly contracted for the first time since 2022. Moreover, the Personal Consumption and Expenditure (PCE) Price Index pointed to signs of easing inflation.
- Adding to this, the US ADP report on private-sector employment suggested that the US labor market is cooling. Furthermore, the US Department of Labor reported on Thursday that initial jobless claims increased from 223,000 to 241,000 in the week ended April 26 – marking the highest level since February.
- Meanwhile, the US ISM Manufacturing PMI remained firmly in contraction territory for the second straight month, though it fell less than expected, from 49.0 to 48.7 in April. Traders now look forward to the release of the US monthly employment details for fresh cues about the Fed's policy outlook.
- The popularly known US Nonfarm Payrolls (NFP) report is expected to show that the economy added 130K new jobs in April, sharply lower than 228K in the previous month. The Unemployment Rate, however, is expected to hold steady at 4.2%, while Average Hourly Earnings might have risen by 0.3%.
Gold price might attract fresh sellers near the pullback resistance zone of $3,260-3,265
From a technical perspective, the overnight breakdown below the $3,265-3,260 horizontal support and the 50% retracement level of the move higher from the vicinity of mid-$2,900s was seen as a fresh trigger for bearish traders. However, oscillators on the daily chart – though they have been losing positive traction – are yet to confirm the negative outlook. This, in turn, prompts some short-covering move and acts as a tailwind for the Gold price.
That said, the aforementioned support breakpoint, around the $3,260-3,265 region, might cap any further gains, above which the XAU/USD pair might reclaim the $3,300 mark. The latter should act as a key pivotal, which if cleared has the potential to lift the Gold price to the $3,348-$3,350 supply zone. Some follow-through buying will suggest that the corrective slide from the all-time peak has run its course and pave the way for a move to the $3,367-$3,368 area en route to the $3,400 mark.
On the flip side, the 50% retracement level, around the $3,229-$3,228 region, now seems to protect the immediate downside ahead of the overnight swing low, around the $3,202-3,201 area. A convincing break below the latter will reaffirm the near-term negative bias and make the Gold price vulnerable to accelerate the downfall towards the $3,200 round figure en route to the $3,160 zone, representing the 61.8% Fibo. level.
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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