Gold recovery (XAU/USD) has regained momentum, trading around the $2,510 mark on Friday. This rebound followed weak US jobs data released on Thursday, with private payrolls growing at a slower-than-expected pace. Despite a slight drop in unemployment claims, the overall labor market seems sluggish as we await Friday’s key Nonfarm Payrolls (NFP) report from the US Bureau of Labor Statistics. This report is critical for shaping expectations around future US interest rates and the value of the US Dollar (USD), both of which significantly influence gold prices.
Gold’s Focus on US Employment and Geopolitics
Gold recovery was triggered by the release of ADP Employment Change data, showing that the US private sector added only 99K new jobs in August, well below expectations. Although a drop in US Initial Jobless Claims slightly offset the weak data, the overall picture points to a slowing labor market. This situation heightens concerns over Federal Reserve (Fed) interest rate cuts, particularly as the Fed shifts its focus from inflation to labor market risks.
The upcoming NFP report will likely be a decisive factor in determining whether the Fed opts for a larger 0.50% rate cut or a standard 0.25% cut in its September 18 meeting. Currently, market-based predictions suggest a 40% chance of a 0.50% cut, while a 0.25% cut is fully expected. Lower NFP data could push the Fed towards a larger cut, which would likely boost gold prices.
Geopolitical Tensions and Their Impact on Gold
On the geopolitical front, US negotiators are reportedly close to brokering a ceasefire between Israel and Hamas, which could reduce gold’s safe-haven appeal. Meanwhile, the conflict in Ukraine continues, with Russia advancing towards the key city of Pokrovsk. Increased tensions in the region could drive up demand for gold, as seen by the Central Bank of Poland’s ongoing gold accumulation since the war began.
Technical Analysis: Bullish Momentum Confirmed
Technically, gold has shown bullish signals, with two consecutive hammer candlestick patterns followed by a strong up day. This indicates that the yellow metal is likely to continue its upward trajectory. The next target for gold is $2,550, with a confirmed break above the August 20 high of $2,531 signaling further gains. However, if gold weakens, the $2,470-$2,460 range will provide the next support level, and a break below that could indicate a deeper downtrend.
Conclusion
Gold’s price movements remain closely tied to US employment data and geopolitical developments. As we await the critical NFP report, the market is bracing for potential changes in Fed policy that could significantly impact gold. Additionally, ongoing global tensions continue to play a crucial role in driving demand for the precious metal.
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