Gold Forecast: XAU/USD bides time before retesting record highs, as US jobs data loom

Gold price gathers strength for the next leg up, battling $2,500 early Thursday.
The US Dollar suffers from the increased odds of a big Fed rate cut in September.
Gold price looks to US jobs data and record highs once $2,500 is cleared sustainably.

Gold price is gathering pace to yield a sustained move above the $2,500 threshold in the Asian session on Thursday, as traders turn their focus to the key US ADP Employment Change data and the ISM Services PMI due later in the day.

Gold price cheers increased bets of outsized Fed rate cut

Gold price bounced off the key short-term daily support level, then at $2,485, following a brief dip under it, as the US Dollar (USD) gave into the bearish pressures emanating from rising expectations that the US Federal Reserve (Fed) will opt for a 50 basis points (bps) interest-rate cut at its September 17-18 policy meeting.

Weak US ISM Manufacturing PMI was joined by further signs of cooling in the labor market, as reflected by the decline in the US Job Openings survey published by the JOLTS on Wednesday.

US Job Openings dropped to a 3-1/2-year low in July, arriving at 7.67 million, following the 7.9 million openings (revised from 8.1 million) in June while below the market expectation of 8.1 million. Markets are now pricing in a 45% chance of an outsized 50 bps rate cut by the Fed later this month, up from 31% at the start of this week, according to the CME Group’s FedWatch tool.

The USD meets fresh supply and languishes in multi-day troughs yet again, in the aftermath of the dovish remarks from San Francisco Fed President Mary Daly. Daly said that the “Fed needs to cut policy rate because inflation is falling and the economy is slowing.” On the side of the rate cut, she said that “we don't know yet,” adding that they “need more data, including Friday's job market report and CPI.”

Therefore, the US Nonfarm Payrolls and wage inflation data due on Friday hold the utmost significance in helping markets gauge the size of the Fed rate cut this month. In the meantime. Gold traders will seek cues from the ADP private sector jobs report, Jobless Claims and ISM Services PMI data slated for release later this Thursday.

These data are likely to have a notable impact on the US Dollar’s performance across the board, in turn, influencing the Gold price action in the near term. Disappointing US employment data could double down on the dovish Fed sentiment, bolstering the bets for an outsized September Fed rate cut and Gold price.

Gold price technical analysis: Daily chart

The short-term technical outlook for Gold price also remains in favor of buyers, as the 21-day Simple Moving Average (SMA), now at $2,490, continues to hold the fort.

The 14-day Relative Strength Index (RSI) edges higher above the 50 level, adding credence to the bullish potential in Gold price.

On the upside, recapturing the $2,500 level on a daily closing basis is critical for Gold price to resume its upward trajectory. The next relevant topside barrier is seen at the record high of $2,532, above which the $2,550 psychological level will be tested.

If the corrective downside regains momentum, Goild price needs a daily closing below the 21-day SMA at $2,490, below which this week’s low of $2,472 will be challenged.

Further down, sellers will need to crack the symmetrical triangle resistance-turned-support at $2,460. A fresh downtrend would initiate below that support level, as they target the $2,430 area, where the triangle support line and the 50-day SMA close in.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Share: Analysis feed

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.