Gold rises sharply as markets reassess Fed rate outlook

RoboForex Analysis Department RoboForex

Gold rose to 4,177 USD per troy ounce on Friday, having gained more than 2% in the previous session. The primary driver of the recovery was US labour market data, which came in weaker than expected, prompting investors to scale back expectations for further Federal Reserve interest rate hikes.

In June, the US economy added only 57,000 new jobs, falling well short of the 110,000 forecast – the weakest result in four months. The unemployment rate ticked up to 4.2%. Earlier in the week, the ADP report also pointed to slowing private-sector employment growth.

Following the data release, the probability of a Fed rate hike in September dropped to approximately 50%, down from 67% before the report. Additional support for the market came from comments by Fed Chair Kevin Warsh, who noted easing inflation expectations while reaffirming the regulator's commitment to price stability.

Reduced inflation risks remain a positive factor for gold. The restoration of commercial traffic through the Strait of Hormuz and progress in US–Iran negotiations have contributed to a further decline in oil prices, supporting sentiment towards the precious metals market.

Technical analysis

On the H4 XAU/USD chart, the market is trading within a consolidation range around the 4,038 USD level and has advanced to 4,190 USD. A move lower towards 3,929 USD is expected, followed by a potential rise to 4,170 USD, with scope for the trend to extend to 4,400 USD. The MACD indicator signals weakening upward momentum, with its signal line above the centre line but pointing firmly downwards.

On the H1 chart, the market broke above the 4,141 USD level and moved higher to 4,190 USD. A decline towards 3,929 USD may follow, with a broad consolidation range forming around 4,060 USD. The Stochastic oscillator supports this scenario, with its signal line below 80 and pointing downwards towards 20, indicating increasing short-term downside pressure.

Conclusion

Gold has staged a sharp recovery following weaker-than-expected US labour market data, which significantly reduced expectations for further Fed rate hikes. The economy added just 57,000 jobs in June against a forecast of 110,000, while unemployment rose to 4.2%, reinforcing signs of a cooling labour market. Fed Chair Warsh's comments on easing inflation expectations have further supported the case for a more cautious rate outlook. At the same time, progress in US–Iran negotiations and the reopening of the Strait of Hormuz have helped lower oil prices, improving sentiment towards gold. Technically, gold appears poised for a near-term pullback towards 3,929 USD before potentially resuming its upward trajectory.

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RoboForex Analysis Department

RoboForex

RoboForex Analysis Department provides timely market insights, expert technical analysis, and actionable forecasts across forex, commodities, indices, and equities.

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