Gold prices surge sharply to six-week high on dismal US labor market data

Gold prices jumped over one percent to $2,385 as US nonfarm payroll data proved mixed and renewed rate cut rumors abounded. June NFP exceeded forecasts while revisions for April and May indicated labor market softening.
US Dollar Index (DXY) drops 0.164% to 104.95 and 10-year Treasury yield falls over six basis points to 4.284%.

Gold prices climbed during the mid-North American session following June’s US Nonfarm Payrolls report, which exceeded estimates but two previous months’ downward revisions indicated labor market softening faster than reported figures indicated. Therefore, traders speculate that the Federal Reserve (Fed) may cut rates this September; providing another source of headwind against the Greenback and tailwind for yellow metal prices.

The XAU/USD pair now trades at $2,391, posting gains of more than 1.40% today and over 2.70% this week after rebounding off daily lows of $2,349. A weakening US Dollar further helped fuel gains; supported in part by lower US Treasury bond yields.

The US Dollar Index (DX) fell 0.16% today to reach 104.95 and US 10-year yield fell more than six basis points to 4.284%.

US Nonfarm Payrolls for June were generally positive; however, April and May’s data had been revised downwardly indicating the economy created 111,000 fewer jobs than originally reported during those two months. As such, June saw unemployment rates exceed expectations by one tenth; thus contributing to rising Unemployment Rates above expectations in this month.

BLS data also revealed that Average Hourly Earnings (AHE) remain flat month over month while they decline annually.

Geopolitics also played an influential role in gold’s journey. Israeli Prime Minister Benjamin Netanyahu sent a delegation to continue negotiations on hostages while underlining that Israel wouldn’t end its conflict until they have achieved all their objectives, CNN reports. Additionally, Hamas officials stated they are awaiting for Israel’s positive response before discussing details for any potential agreements on negotiations over them according to CNN reports.

Daily digest market movers: Gold prices surge post US NFP Report

US Nonfarm Payrolls rose by an estimated 206K, exceeding estimates by 18K and 218K for April and May respectively. However, when revised downward April’s figures accounted for just 118,000 while 218K made up 23%.
Average Hourly Earnings (AHE) declined year over year by 3.9% YoY, in line with expectations; and unemployment rose from 4.0% to 4.1%.
On Wednesday, the Federal Open Market Committee (FOMC) published June’s Meeting Minutes which revealed that most participants estimated current policy as restrictive but opened the door for rate increases if needed. Policymakers recognized the economy is cooling, yet may respond swiftly if unexpected economic weakness emerges.
According to CME FedWatch Tool’s odds calculator, odds for a 25-basis point Fed rate cut in September have increased from 66% on Thursday. Furthermore, December 2024 fed funds rate futures contract indicates that there could be further tightening towards year’s end by 40 basis points (bps).

Technical analysis: Gold price smashes through Neck-and-Shoulders neckline; Aims at $2,400

Gold price has decisively broken through its Neck-and-Shoulders neckline and lifted spot prices near $2,390 mark; an indication of bulls taking charge and higher prices ahead.

As illustrated by a bullish Relative Strength Index (RSI), momentum appears to have shifted significantly in favor of buyers as seen through daily closes above June 21’s high of $2,368 could pave way for higher trading ranges within $2,370-$2,400 area where buyers target higher prices.

If the price pierces $2,400, it would reveal its year-to-date peak of $2.450 before challenging $2,500.

Should sellers push the spot price below $2,350, further declines could target $2,300 support level; failing this support point, buyers might look toward May 3 low of $2.277 before turning their eyes toward March 21 high of $2.222 as demand zones.

Gold has always played an essential role in humanity, both as an asset store and medium of exchange. Today, in addition to jewelry uses and its timeless appeal, its use as an investment is increasingly seen as safe-haven asset during turbulent times – thus serving as a hedge against inflation or depreciating currencies as it’s independent from any particular issuer or government issuer. Gold FAQs
To gain further insights into Gold please view these frequently Asked Questions (FAQs).

Central banks are among the primary holders of Gold. To bolster their currencies during turbulent economic conditions, central banks often buy Gold to diversify their reserves and improve perceived strength of economy and currency. High Gold reserves can serve as a sign that trust exists within countries’ solvency systems – in 2022 alone central banks purchased 1,136 tonnes worth approximately $70 billion according to data provided by World Gold Council which marks it as their highest annual purchase ever! Central banks from emerging economies such as China India and Turkey were swift in increasing their Gold holdings quickly.

Gold has an inverse relationship to both the US Dollar and Treasuries – two key reserve assets and safe haven assets – making it an attractive asset in times of economic instability and stress. When the Dollar depreciates, gold typically rises, providing investors and central banks with diversification during turbulent periods. Furthermore, its price tends to weaken with market rallies while sell-offs in riskier assets tend to benefit its price instead.

Geopolitical instability or fears of deep recession can quickly drive Gold prices skyward due to its safe-haven status as an investment vehicle. Since Gold is yieldless asset that tends to appreciate with lower interest rates while increasing costs can weigh down on it; most moves hinge upon how the US Dollar (USD) behaves as Gold assets are priced against it (XAU/USD); therefore a strong Dollar tends to keep Gold’s prices controlled whereas weakening it could push them higher.