Gold price forecast (XAU/USD) fell by over 0.5% to around $2,320 on Friday. This drop followed the release of the US Nonfarm Payrolls (NFP) report, which showed an addition of 272,000 jobs in May. This figure exceeded expectations and surpassed April’s revised number.
US Nonfarm Payrolls Impact
The US Bureau of Labor Statistics (BLS) reported a 4.1% year-over-year increase in Average Hourly Earnings, up from April’s revised 4.0% and higher than the predicted 3.9%. The Unemployment Rate rose to 4.0%, up from the forecast of 3.9%, which was the same as the previous rate.
These results suggest rising wage inflation, potentially leading to increased core and headline inflation. This scenario could lead the Federal Reserve (Fed) to delay any interest rate cuts. Higher interest rates are unfavorable for gold due to the increased opportunity cost of holding a non-yielding asset.
People’s Bank of China Stops Gold Purchases
Gold price forecast were already declining on Friday due to news that the People’s Bank of China (PBoC) halted its gold purchases in May after 18 months of continuous buying. This decision contributed to a downward trend in gold prices.
China’s Gold Reserves and Market Influence
Gold prices fell as the PBoC’s reserves remained at 72.8 million troy ounces by the end of May, unchanged from April. This stagnation followed a peak in China’s gold reserves in April, marking 18 consecutive months of growth.
Central bank purchases, especially in Asia, have significantly impacted gold prices. These acquisitions contributed to gold reaching a record high of $2,450 in May. According to the World Gold Council (WGC), central bank purchases and other over-the-counter transactions have played a crucial role in gold price forecast resilience.
Central Banks and Gold Accumulation
Asian and emerging market central banks have been increasing their gold reserves to safeguard against potential currency devaluation, especially against the US Dollar (USD). The Fed’s revised interest rate projections in spring bolstered the USD, increasing reserve accumulation.
Recent disappointing US economic data has led investors to speculate on possible Fed rate cuts in September, with probabilities around 67%, according to the CME FedWatch tool.
Global Interest Rate Trends
Globally, expectations for interest rates are decreasing. The Bank of Canada (BoC) reduced its overnight rate from 5.00% to 4.75% on Wednesday, followed by a similar move by the European Central Bank (ECB). With lower inflation in Switzerland, there’s speculation the Swiss National Bank (SNB) may also reduce interest rates.
Technical Analysis: Gold Price Trends
Gold initially broke out of its narrow range of $2,315 to $2,358 but then experienced a significant decline, retreating to within this range. If the price falls below $2,315, it could target $2,303, the 0.618 Fibonacci extension of the prior move. Further decline might see gold find support at $2,279.
Despite the recent short-term weakness, the medium and long-term trends for gold remain bullish, suggesting a potential for recovery.
For the latest gold price updates, visit Daily Gold Signal. For more detailed daily gold updates, check out this link.
