Gold Price Forecast: XAU/USD sees a dead cat bounce ahead of US jobs data
- Gold bounces off eight-week lows at $4,110 early Tuesday, awaiting US JOLTS jobs data.
- The US Dollar enters bullish consolidation alongside US Treasury yields; Fed rate-hike bets persist.
- Gold confirms a falling wedge breakdown, while daily RSI stays bearish.
Gold attempts a tepid recovery from an eight-week low of $4,110, reached on Monday, pausing the sharp sell-off early Tuesday.
Gold remains vulnerable as US jobs data looms
Gold is seeing a dead cat bounce as sellers take a breather, with the US Dollar (USD) entering a phase of bullish consolidation alongside the US Treasury bond yields.
The global bond rout deepened on Monday, bringing the monthly sell-off to its heaviest in two years and sending the benchmark 10-year US Treasury yield to a 19-year high above 5.27%.
Soaring yields triggered a massive meltdown in global stocks, making them less attractive as an alternative investment. As a result, a ‘sell everything’ mode ensued, and Gold crumbled almost 4%. Investors liquidated their Gold long positions to cover their losses in bond and stock markets.
The bright metal also faced headwinds from increased bets on an October US Federal Reserve (Fed) interest rate hike, which bolstered USD and weighed heavily on non-yielding assets such as Gold.
Markets are pricing in a 70% chance of a rate hike in October, according to CME Group’s FedWatch Tool.
Elevated Oil prices, amid the US-Iran standoff and renewed threats of US strikes on Iran, keep global yields, including US Treasury bond yields, at higher levels. These pose a major downside risk to bullion.
Even after US President Donald Trump rejected Iran's truce offer over the weekend, Iranian Foreign Minister Abbas Araghchi on Monday noted that Tehran discussed proposals with Qatari mediators that are to be put to the US, as he leaves it to the latter whether they want to choose a deal or peace.
Amidst the Middle East stalemate, surging yields and hawkish Fed expectations, Gold remains vulnerable to further downside risks, and any recovery will likely be sold off unless Friday’s US Nonfarm Payrolls (NFP) significantly disappoint and temper bets for at least two more rate hikes this year.
In the meantime, the focus will remain on the upcoming US JOLTS Job Openings Survey and a slew of speeches from several Fed policymakers for fresh trading impetus in Gold.
Cook flags persistent inflation risks from AIand geopolitics, keeps Fed bias hawkish
Fed’s Cook delivers a slightly more hawkish-than-usual tone, with the 7/10 FXS Speechtracker score just above the 6.9/10 historical average and emphasizing ongoing inflation pressures from Artificial Intelligence and Middle East conflict. While acknowledging that AI-driven productivity should bring modest disinflation over the next few years, Cook stresses that these gains will not arrive in time to counter this year’s broadening price pressures and underscores that the labor market is well positioned to absorb further rate increases, even as AI could temporarily lift unemployment and leave the Fed with limited scope to cut without reigniting inflation. The conditional language around “number and magnitude” of future rate moves keeps the door open to additional tightening, data permitting.
The FXS Fed Sentiment Index slipped by 0.63 points to 146.89, signaling a modest pullback in perceived hawkishness despite the speech’s above-baseline tone. With the index still deep in hawkish territory well above the neutral 100 mark, the move suggests markets see Cook’s remarks as reinforcing an already restrictive policy stance rather than materially escalating the Fed’s tightening bias.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,135.00, holding below the 21-day, 50-day and 100-day simple moving averages (SMAs) clustered between roughly $4,290 and $4,330, which keeps the near-term bias bearish. The metal also remains well under the 200-day SMA around $4,539, reinforcing a medium-term capped tone, while the downward-sloping resistance trend line from $4,519 further limits recovery attempts. The Relative Strength Index (14) near 36 suggests weak momentum but not outright oversold conditions, hinting that sellers retain control, though immediate downside acceleration may be tempered.
On the downside, initial support is seen at the rising trend-line base near $3,990, where dip-buying interest could emerge if the current pullback extends. On the topside, the first resistance band is defined by the 100-day SMA at $4,292, followed closely by the 50-day SMA at $4,321 and the 21-day SMA at $4,325, forming a dense supply zone that gold would need to reclaim to ease bearish pressure. Above these, the descending resistance trend line coming from the $4,519 peak and the 200-day SMA near $4,539 constitute a higher barrier, and only a sustained break over this area would signal a more durable bullish reversal.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
