Gold prices rally on Friday as investors hope the Federal Reserve will lower interest rates soon. The US Dollar weakens, making gold, traded in dollars, more attractive.
US Unemployment Rate and Job Report
On Friday, the US Nonfarm Payrolls (NFP) report showed the unemployment rate unexpectedly rose to 4.1% from 4.0%. This is the highest since November 2021, suggesting a slower labor market. This could lead the Federal Reserve to cut interest rates to boost hiring. Despite the rise in unemployment, the NFP report showed 206,000 new jobs in June, higher than the expected 190,000.
Average Hourly Earnings stayed the same with a 0.3% growth as expected. Year-over-year, wage inflation cooled to 3.9% from 4.1%, according to the US Bureau of Labor Statistics.
Interest Rate Cuts and a Weaker Dollar
Gold prices rally traded in the $2,360s on Friday, up by over a third of a percent. The chance of the Federal Reserve cutting its main policy rate by 0.25% by September increased to 72%. This makes gold more attractive because holding it has no interest cost.
A weaker US Dollar also helped gold prices rally. The dollar fell because of expected lower interest rates and stronger major currencies like the Pound and the Euro. The Pound rose after a Labour Party win in the UK, and the Euro recovered as the French far-right National Rally party seemed unlikely to win a majority in the upcoming elections.
Geopolitical and Macro Factors
Gold prices rally is also driven by global events. Conflicts in the Middle East and Ukraine, and the risk of a Trump presidency, push investors to gold. The BRICS trading bloc aims to reduce the use of the Dollar in global trade, boosting gold demand. However, lower political risk in Europe and easing central bank demand might reduce some pressure on gold prices.
Technical Analysis: Gold Reaches Resistance
Gold prices rally surpassed the 50-day Simple Moving Average (SMA), a key technical level. However, it faces resistance at the $2,368 level, the high from June 21. A break above this level could continue the bullish trend, targeting the $2,388 high from June 7 and the $2,451 all-time high. Even though a bearish pattern was invalidated, there’s still a risk of a new pattern forming. If gold prices fall to the $2,279 level and break through, prices might reverse to $2,171.
Conclusion
Gold prices rally due to US economic data, Federal Reserve policies, currency movements, and global events. Investors watch these factors to predict future gold price trends.
For more insights and updates on gold prices, visit our daily gold signal page and daily gold update category.
