Gold price flat lines above one-month low as traders seem reluctant ahead of US NFP report
- Gold price struggles to capitalize on the overnight modest gains amid the Fed’s hawkish tilt.
- The USD climbs to a fresh multi-month peak and contributes to capping the precious metal.
- Trade jitters act as a tailwind for the XAU/USD pair as traders now await the US NFP report.
Gold price (XAU/USD) trades with a negative bias below the $3,300 mark during the Asian session on Friday and remains well within striking distance of a one-month low touched earlier this week. The US Dollar (USD) prolongs its uptrend for the seventh consecutive day and advances to its highest level since late May amid the Federal Reserve's (Fed) hawkish-than-expected stance. This, in turn, is seen as a key factor that continues to act as a headwind for the non-yielding yellow metal.
Meanwhile, US President Donald Trump signs an executive order imposing higher tariffs of up to 41% on key trading partners across the globe. Adding to this, the latest round of US-China trade talks ended with no deal in place. The developments temper investors' appetite for riskier assets and offer some support to the safe-haven Gold price. Traders also seem reluctant and opt to wait for the release of the US Nonfarm Payrolls (NFP) report before positioning for a firm near-term direction.
Daily Digest Market Movers: Gold price traders seem reluctant amid mixed cues, ahead of crucial US jobs data
- Federal Reserve Chair Jerome Powell tempered hopes for an immediate rate cut and said on Wednesday that it is too soon to say whether the central bank will lower borrowing costs at the September meeting. Powell added that the current modestly restrictive monetary policy has not been holding back the economy and is in the right place to manage continued uncertainty around tariffs and inflation.
- The upbeat economic outlook was reaffirmed by the Advanced US GDP print, which showed that the economy expanded by a 3% annualized pace during the second quarter of the current year. Moreover, the US Bureau of Economic Analysis reported on Thursday that the Personal Consumption Expenditures (PCE) Price Index climbed to 2.6% in June from 2.4% in the previous month (revised up from 2.3%).
- Meanwhile, the core gauge, which excludes volatile food and energy prices, rose 2.8% during the reported month, matching May's reading and surpassing the consensus estimate of 2.7%. The data reaffirmed the view that price pressures would pick up in the second half of the year and delay the Fed's rate-cutting cycle until at least October, lifting the US Dollar to a multi-month top and capping the Gold price.
- US President Donald Trump on Thursday signed an executive order imposing new tariffs on a number of trading partners that go into effect on August 7. The Trump administration said that the universal tariff will remain at 10% for countries with which the US has a trade surplus, while nations with which the US has a trade deficit face a 15% floor. The fate of China’s trade relations with the US, however, remains uncertain.
- Despite a two-day meeting between Chinese and American negotiators this week, the world's two largest economic giants are yet to agree on a trade deal. US Treasury Secretary Scott Bessent said that any extension of the 90-day tariff truce, which is set to expire later this month, would be up to Trump. This, in turn, tempers investors' appetite for riskier assets and offers some support to the safe-haven commodity.
- Traders also seem reluctant to place aggressive directional bets around the XAU/USD pair and opt to wait for the release of the US monthly employment details. The popularly known Nonfarm Payrolls (NFP) report is expected to show that the US economy added 110K jobs in July, down from 147K in the previous month, and the Unemployment Rate is seen edging higher to 4.2% from 4.1% in June.
- Friday's US economic docket also features the release of the ISM Manufacturing PMI, which could further influence the USD and provide some meaningful impetus to the bullion. Nevertheless, the precious metal remains on track to register losses for the third straight week and could weaken further amid the underlying bullish sentiment surrounding the USD.
Gold price needs to clear $3,314-3,315 hurdle to back case for a meaningful recovery
The overnight swing high, around the $3,314-3,315 region, could act as an immediate hurdle for the Gold price. A sustained move above the latter could trigger a short-covering rally and lift the XAU/USD pair beyond the $3,325-3,326 horizontal barrier, towards the next relevant hurdle near the $3,360-3,365 region. Some follow-through buying should pave the way for a move towards reclaiming the $3,400 round figure.
On the flip side, the 100-day Simple Moving Average (SMA), around the $3,270 region, nearing a one-month low touched on Wednesday, might continue to protect the immediate downside. A convincing break below could drag the Gold price to the June swing low, around the $3,248-3,247 region. The downward trajectory could extend towards the $3,325 intermediate support before the commodity eventually drops to test the $3,200 round figure.
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.