Gold prices tumbled on Friday, closing below the crucial $2,500 level, as investors grappled with conflicting signals from the US economy. Despite a mixed jobs report, rising hourly earnings and a resilient dollar index fueled uncertainty about the Federal Reserve’s potential rate cut in September. The yellow metal’s failure to break the $2,531 resistance level further dampened bullish sentiment.
Gold Price Plunges as US Economic Data Clouds Fed Rate Hike Outlook
Gold prices plummeted on Friday, closing well below the all-time high of $2,531, as mixed US economic data and conflicting signals from Federal Reserve officials cast doubt on the likelihood of a significant interest rate cut in September.
The XAU/USD pair experienced a sharp decline, falling more than 0.80% in the late North American trading session. The precious metal’s downward trajectory was fueled by the Nonfarm Payrolls report, which missed expectations but showed improvement compared to the previous month. While the unemployment rate decreased, rising average hourly earnings added to the uncertainty surrounding the Fed’s policy stance.
Market sentiment swung wildly as traders weighed the implications of the economic data on Fed rate hike probabilities. At one point, the odds of a 50-basis-point cut surged as high as 70%. However, as the dust settled, the market shifted its expectations towards a more likely 25-basis-point reduction.
Fed officials echoed the dovish tone, with several policymakers expressing their support for easing monetary policy. New York Fed President John Williams and Governor Christopher Waller both advocated for lowering rates to maintain a balanced labor market. Chicago Fed President Austan Goolsbee also emphasized the consensus among policymakers to reduce borrowing costs.
Despite falling US Treasury yields, the gold price was further pressured by a strengthening US dollar. The US Dollar Index rebounded from a low of 101.00, gaining over 0.15% as investors sought safe-haven assets.
In the geopolitical arena, the ongoing conflict in Gaza continued to be a source of volatility. US Secretary of State Antony Blinken indicated that a ceasefire agreement was close, but challenges remained to be addressed.
Technical Outlook on Gold (XAUUSD)
Gold prices, while maintaining an overall bullish trend, have taken a short-term downturn. After reaching a daily high above $2,520, the XAU/USD pair experienced a significant reversal, forming a bearish engulfing candle pattern. This pattern has opened the door for the market to perform in favor of the bears. Subsequently, the price action fell and bottomed at the $2,476 price level, before bouncing again.
The bearish momentum is confirmed by the Relative Strength Index (RSI), which is on the verge of crossing below its neutral level, currently at 54, down from 60. This downward trend in the RSI indicates a weakening of bullish sentiment.
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