- Gold price drops to $2,420 after peaking at $2,477, down nearly 0.80%.
- US Nonfarm Payrolls for July miss expectations, unemployment rate rises to 4.3%.
- Treasury yields and USD plunge, prompting banks to anticipate faster Fed rate cuts.
Gold price reversed its course and tumbled almost 1% after hitting a two-week high of $2477 following weaker-than-expected data from the United States (US). This weighed on the Greenback and sent US Treasury yields plummeting as investors expected the Federal Reserve could cut rates faster than they thought. The XAU/USD trades at $2,420 at the time of writing
XAU/USD whipsaws as disappointing US economic indicators weigh on the Greenback and Treasury yields
Friday’s US Nonfarm Payrolls figures disappointed investors, which were still digesting a dismal ISM Manufacturing PMI report that spurred concerns about the health of the US economy.
The US Department of Labor revealed that 114K people were added to the workforce in July, missing estimates of 175K, and the previous figures were downward revised from 206K to 179K. Further data showed the Unemployment Rate ticked up from 4.1% to 4.3% and Average Hourly Earnings dipped a tenth from 0.3% to 0.2%.
Bullion rallied sharply, capitalizing on the fall of the US 10-year Treasury bond yield, which tanked over 15 basis points to 3.815%. The Greenback was also hurt, collapsing more than 1.13% according to the US Dollar Index (DXY), which is at 103.16.
After the data, most banks began to price in more aggressive monetary policy easing by the Fed. Bank of America expects the first cut in September instead of December, while Citi and JP Morgan expect the Fed to lower rates by 50 bps in September and November.
XAU/USD Price Analysis: Technical outlook
Gold price has retreated toward the July 31 lows of $2,404-$2,410, which could be attributed to profit-taking ahead of the weekend, as US yields and the Greenback remain at weekly lows. From a technical standpoint, XAU/USD is set to remain bullish and if buyers achieve a daily close above $2,450, this could exacerbate a challenge towards the all-time high, ahead of the $2,500 mark. On further weakness, prices could fall below $2,400, which could pave the way for a pullback to the 50-day moving average (DMA) at $2,364, before testing the 100-DMA at $2,337.
Gold FAQs
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.
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.
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.
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.
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.
Recommended content
Editors’ Picks
EUR/USD climbs above 1.0900, looks to post weekly gains
EUR/USD gathers bullish momentum and trades above 1.0900 in the American session on Friday, looking to end the week in positive territory. The US Dollar remains under strong selling pressure following the disappointing jobs data, helping the pair push higher.
GBP/USD clings to daily gains near 1.2800 after weak US jobs data
GBP/USD clings to daily gains at around 1.2800 in the second half of the day on Friday. Nonfarm Payrolls in the US rose by 114,000 in July. This reading missed the market expectation of 175,000 by a wide margin and triggered a USD selloff.
Gold pulls away from daily highs, holds above $2,420
After coming within a touching distance of a new all-time high near $2,480 with the immediate reaction to disappointing US labor market data on Friday, Gold reversed its direction and declined below $2,420. Profit-taking ahead of the weekend might be weighing on XAU/USD.
Bitcoin bounces off from the ascending trendline
Bitcoin and Ethereum have retested their key support levels, with a break below these levels potentially signaling a bearish trend ahead. At the same time, Ripple shows resilience and could rally in the coming days after testing its key support level.
Week ahead – RBA and BoJ summary of opinions take center stage
RBA decides on policy as hike bets disappear. BoJ Summary of Opinions awaited for more hike hints. After Fed, Dollar turns to ISM non-manufacturing PMI. New Zealand and Canada jobs data also on tap.