Gold price declines sharply ahead of US NFP data
|- Gold price extends its intraday losses after retreating from a fresh two-week high in Friday’s early European session.
- Traders prefer to wait for the US NFP report before positioning for the near-term trajectory.
- Fed rate cut bets are keeping the US bond yields and the USD depressed, lending some support.
Gold price (XAU/USD) trades with a negative bias after retracing from fresh two-week highs during the European trading hours on Friday. Investors now opt to move to the sidelines and wait for the release of the closely-watched monthly employment details from the United States (US). The popularly known Nonfarm Payrolls (NFP) report will play a key role in influencing the Federal Reserve's (Fed) future policy decisions, which, in turn, should provide a fresh impetus to the non-yielding yellow metal.
Heading into the key data risk, rising bets for an imminent interest rate cut by the Fed in September, bolstered by the incoming softer US macro data, might continue to act as a tailwind for the Gold price. Furthermore, dovish Fed expectations keep the US Treasury bond yields and the US Dollar (USD) depressed near a multi-week low, which should further contribute to limiting the downside for the commodity. Apart from this, geopolitical tensions stemming from conflicts in the Middle East suggest that the path of least resistance for the XAU/USD is to the upside.
Meanwhile, fresh May data on China's Gold reserves has weighed on the Gold price. The latest report shows that the backlog remains steady at 72.80 million fine troy oz at the end of May, unchanged from April, suggesting a pause in gold reserves accumulation world's second-largest economy, which remained a major driving force behind Gold's rally in past months.
Daily Digest Market Movers: Gold price slumps ahead of the crucial US jobs report
- Growing acceptance that the Federal Reserve will start cutting interest rates later this year amid signs of a slowdown in the US economy continues to lend some support to the non-yielding Gold price.
- The US Department of Labor (DoL) reported on Thursday that the number of Americans applying for unemployment insurance benefits increased more than expected by 229K in the week ending June 1.
- This, along with Wednesday's ADP report on private-sector employment, suggests that the US labor market is cooling, cementing bets for a September Fed rate cut and weighing on the US Treasury bond yields.
- The yield on the benchmark 10-year US government bond languishes near its lowest level in two months, which, in turn, is seen undermining the US Dollar and acting as a tailwind for the yellow metal.
- The underlying strong bullish sentiment across the global equity markets might hold back traders from positioning for any further gains ahead of the release of the crucial US monthly employment details.
- The popularly known Nonfarm Payrolls (NFP) report is expected to show that the US economy added 185K jobs in May as compared to 175K previous and the unemployment rate held steady at 3.9%.
- Apart from this, Average Hourly Earnings will influence the inflation trajectory and the Fed's future policy decision, which, in turn, will help in determining the next leg of a directional move for the XAU/USD.
Technical Analysis: Gold price will likely confront the $2,400 resistance
From a technical perspective, Thursday’s sustained move beyond the $2,364 area, or last week's swing high, was seen as a fresh trigger for bullish traders. That said, mixed oscillators on the daily chart warrant some caution before positioning for any further gains. Hence, any subsequent move up is more likely to confront stiff resistance and remain capped near the $2,400 mark. Some follow-through buying, however, has the potential to lift the Gold price to the next relevant hurdle near the $2,425 zone en route to the $2,450 region, or the all-time peak touched in May.
On the flip side, the $2,060 horizontal zone now seems to protect the immediate downside. Any further decline might be seen as a buying opportunity around the $2,340 region. This should help limit the downside for the Gold price near the $2,315-2,314 area or the multi-week low touched on Tuesday. A convincing break below, however, will confirm a breakdown through the 50-day Simple Moving Average (SMA) and pave the way for deeper losses. The XAU/USD might then weaken further below the $2,300 round-figure mark and test the $2,280 support zone.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.37% | -0.40% | 0.36% | -0.30% | -1.17% | -0.80% | -1.41% | |
| EUR | 0.37% | -0.03% | 0.72% | 0.06% | -0.80% | -0.43% | -1.03% | |
| GBP | 0.40% | 0.03% | 0.75% | 0.09% | -0.77% | -0.40% | -1.00% | |
| CAD | -0.36% | -0.73% | -0.76% | -0.67% | -1.53% | -1.16% | -1.76% | |
| AUD | 0.30% | -0.05% | -0.08% | 0.68% | -0.85% | -0.46% | -1.09% | |
| JPY | 1.14% | 0.79% | 0.75% | 1.51% | 0.82% | 0.35% | -0.22% | |
| NZD | 0.79% | 0.41% | 0.39% | 1.14% | 0.49% | -0.37% | -0.60% | |
| CHF | 1.37% | 1.02% | 0.98% | 1.73% | 1.07% | 0.23% | 0.60% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Next release: Fri Jun 07, 2024 12:30
Frequency: Monthly
Consensus: 185K
Previous: 175K
Source: US Bureau of Labor Statistics
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
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