Gold prices surged over 1% on Friday, reaching a six-week high of $2,385. This jump comes amidst mixed signals from the latest US Nonfarm Payrolls (NFP) data. While June’s numbers surpassed expectations, downward revisions for April and May suggest a potential slowdown in the labor market. This has fueled speculation of a rate cut by the Federal Reserve, sending the US dollar and Treasury yields tumbling. The US Dollar Index (DXY) fell 0.16%, and the 10-year Treasury yield dropped more than six basis points, further bolstering gold’s appeal.
Gold Shines Brighter on Mixed Jobs Report and Fed Pivot Hopes
Gold prices rocketed higher in mid-day North American trading after the release of June’s US Nonfarm Payrolls data. While the headline number topped forecasts, revisions to prior months painted a picture of a rapidly cooling labor market. This sparked a surge in bets on a Federal Reserve rate cut by September, sending the US dollar (“Greenback”) tumbling and acting as a tailwind for the “yellow metal” (gold). XAU/USD, the currency pair representing gold priced in US dollars, surged over 1.4% on the day and topped 2.7% for the week, buoyed in part by the weaker dollar and lower Treasury yields.
Daily Digest: Gold Price Advances on Mixed US Jobs Data
The US Nonfarm Payrolls report sent shockwaves through the market today, with gold emerging as a key beneficiary. While headline figures showed a seemingly healthy increase of 206K jobs, exceeding estimates of 190K, the picture was far from rosy. Downward revisions to prior months’ data revealed a significant slowdown in hiring, with April and May numbers dropping to 108K and 218K, respectively. This, coupled with a slight decline in Average Hourly Earnings growth and a rising Unemployment Rate, painted a portrait of a cooling labor market.
Adding fuel to the fire, Wednesday’s release of the Federal Open Market Committee (FOMC) Meeting Minutes revealed a shift in the Fed’s stance. The minutes indicated that policymakers acknowledged the economic slowdown and expressed openness to adjusting the current restrictive monetary policy in the face of unexpected weakness. This dovish shift fueled speculation of a potential rate cut, with odds of a September reduction jumping to 70% according to the CME FedWatch Tool, up from 66% the previous day. Furthermore, December 2024 fed funds rate futures contracts suggest a potential 40-basis-point easing by year’s end. With the prospect of lower interest rates looming, the US dollar weakened, and investors flocked to gold, pushing its price to a six-week high.
Technical Overview: Gold Prices Stage Surprise Rally, Bulls Break Key Resistance
In a surprising turn of events, what initially appeared to be a bearish reversal has transformed into a potential bullish breakout. Bulls decisively surpassed the key neck and shoulder resistance line, suggesting a shift in momentum. The previously strong resistance at $2,360 has now turned into a potential support level as prices surged towards $2,400. This bullish sentiment is further reinforced by the Relative Strength Index (RSI) currently at 61, indicating strong upward momentum.
The upcoming week could see the gold market maintain its bullish trajectory. However, even if a pullback occurs, the $2,360 level is likely to act as a new, higher support floor. This could potentially propel prices back towards the previous peak of $2,440.
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