Gold price have shown a steady increase for three consecutive days, reaching near the weekly high ahead of the European session. However, investors are adopting a cautious approach, awaiting the US Nonfarm Payrolls (NFP) report before committing to new positions. The expectation of a possible interest rate cut by the Federal Reserve (Fed) in September has placed pressure on the US Dollar, offering some support to gold, which doesn’t provide a yield.
Fed Rate Cut Speculations and Gold
The anticipation of a rate cut by the Fed has weakened the US Dollar for the third day in a row, which typically benefits gold. The precious metal has also gained due to mixed US employment data, raising concerns about economic health. These factors, combined with ongoing geopolitical tensions, have driven investors toward safer assets like gold. Nonetheless, caution remains, and traders are waiting for further confirmation of the trend before extending their positions.
Recent Employment Data and Economic Signals
The US NFP report labor market appears to be slowing down, as indicated by recent reports. The ADP National Employment Report showed that private-sector jobs rose by just 99,000 in August, the smallest increase since January 2021. This figure fell short of the expected 145,000. Additionally, a report revealed that job openings dropped to a three-and-a-half-year low in July, further highlighting labor market weakness.
In contrast, the Institute for Supply Management’s (ISM) Services PMI edged up slightly from 51.4 to 51.5 in August, while the Employment Index dropped to 50.2. Although Initial Jobless Claims decreased more than expected to 227,000, the broader labor market outlook still raises concerns. Fed officials, such as San Francisco’s Mary Daly and Chicago’s Austan Goolsbee, have hinted at the need to reduce interest rates due to slowing economic growth and declining inflation.
Market Outlook Ahead of US Nonfarm Payrolls
The market’s focus is now on the upcoming US Nonfarm Payrolls report, which is expected to reveal the addition of 160,000 jobs in August, with the unemployment rate dipping to 4.2%. The outcome of this report will likely shape market sentiment and influence the Fed’s monetary policy decisions.
Technical Analysis of Gold Price
Technically, gold’s next hurdle lies between $2,524 and $2,525. A decisive breakthrough could signal further bullish momentum, potentially pushing the price to new all-time highs. Indicators on the daily chart remain positive, suggesting more room for upside movement. However, if gold fails to hold above the $2,500 mark, a retreat to the $2,470 support level could follow. A deeper decline could target the 50-day Simple Moving Average (SMA) around $2,440, and further down, the 100-day SMA near $2,388.
Conclusion
In summary, gold is holding steady as traders await critical US jobs data, with the market’s focus on Fed policy and the economic outlook. If the price clears the $2,525 resistance, it may pave the way for a new upward trend. However, caution prevails as downside risks also linger.
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