Gold price climbs above $2,450 as Fed signals likely rate cuts, US NFP eyed
- Gold price gains as Fed’s signals rate cuts and Middle East woes escalate.
- The Fed acknowledged that policymakers have gained greater confidence due to a slowdown in price pressures in the second quarter.
- Investors await the US NFP data for July, which will be published on Friday.
Gold price (XAU/USD) posts a fresh two-week high at $2,462.30 in Thursday’s American session. The precious metal exhibits sheer strength as US bond yields have nosedived on firm expectations that the Federal Reserve (Fed) will pivot to policy normalization in September. 10-year US Treasury yields skid below 4.0% for the first time in six months. Lower yields on interest-bearing assets bode well for non-yielding assets, such as Gold, as it reduces the opportunity cost of holding investment in them.
The expectations for the Fed to begin reducing interest rates from September rose after the Fed’s dovish guidance on interest rates on Wednesday. The Fed left interest rates unchanged in the range of 5.25% -5.50% and pointed to cooling inflationary pressures, easing labor market strength, as expected, which made speculation for rate cuts in September as a done deal.
Fed Chair Jerome Powell said, "If we were to see inflation moving down more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting”, Reuters reported.
Daily digest market movers: Gold price recovers after weak US Q2 Unit Costs, ISM Manufacturing PMI
- Gold price rises above $2,450 in Thursday’s North American trading hours. Its near-term outlook remains firm due to multiple tailwinds. Apart from firm expectations that the Fed will start lowering its key borrowing rates from September, upside risks to widening Middle East conflicts have also improved Gold’s safe-haven appeal.
- Iran vows to retaliate for the killing of Hamas leader Ismail Haniyeh by an Israeli air strike in Tehran, stating that Israel will "pay a heavy price”. This has prompted risks of an all-out war in the Middle East. Historically, investors see investment in precious metals as a safe bet amid geopolitical tensions.
- Meanwhile, the US Dollar (USD) exhibits a volatile performance due to weak preliminary United States (US) Q2 Unit Labor Costs and ISM Manufacturing Purchasing Managers’ Index (PMI) report for July. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, faces pressure near 104.40 after recovering from the intraday low of 103.86.
- The Q2 Unit Labor Costs, a key measure of employee cost borne by the employer, declined to 0.9% from the estimates of 1.8% and the prior release of 3.8%, downwardly revised from 4.0%. Meanwhile, the PMI report showed that activities in the manufacturing sector declined to 46.8. Economists expected an improvement to 48.8 from June’s reading of 48.5. However, a figure below the 50.0 threshold is itself considered a contraction in factory activities.
- Going forward, the major trigger for the FX domain will be the US Nonfarm Payrolls (NFP) report, which will be published on Friday. Economists have estimated that 175K new workers were hired in July, lower than the former addition of 206K. The Unemployment Rate is expected to remain steady at 4.1%. Investors will keenly focus on the Average Hourly Earnings data, a key measure of wage growth that fuels consumer spending, which eventually influences price pressures. Annually, the wage growth measure is estimated to have decelerated to 3.7% from the prior reading of 3.9%, with the monthly figure growing steadily by 0.3%.
US Dollar Price Today:
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.33% | 0.53% | 0.33% | 0.11% | 0.11% | 0.09% | -0.08% | |
| EUR | -0.33% | 0.21% | -0.03% | -0.23% | -0.22% | -0.23% | -0.41% | |
| GBP | -0.53% | -0.21% | -0.23% | -0.42% | -0.42% | -0.43% | -0.61% | |
| JPY | -0.33% | 0.03% | 0.23% | -0.22% | -0.22% | -0.29% | -0.44% | |
| CAD | -0.11% | 0.23% | 0.42% | 0.22% | 0.00% | -0.01% | -0.18% | |
| AUD | -0.11% | 0.22% | 0.42% | 0.22% | -0.01% | -0.01% | -0.18% | |
| NZD | -0.09% | 0.23% | 0.43% | 0.29% | 0.01% | 0.00% | -0.17% | |
| CHF | 0.08% | 0.41% | 0.61% | 0.44% | 0.18% | 0.18% | 0.17% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Technical Analysis: Gold price jumps to near $2,460
Gold price trades in a channel formation on a daily timeframe, which is slightly rising but broadly exhibited a sideways performance for more than three months. The 50-day Exponential Moving Average (EMA) near $2,370 continues to provide support to the Gold price bulls.
The 14-day Relative Strength Index (RSI) moves higher to near 60.00. If the RSI climbs above that level, the momentum will shift to the upside.
A fresh upside would appear if the Gold price breaks above its all-time high of $2,483.75, which will send it into unchartered territory.
On the downside, the upward-sloping trendline at $2,225, plotted from the October 6 low near $1,810.50, will be a major support in the longer term.
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 Aug 02, 2024 12:30
Frequency: Monthly
Consensus: 175K
Previous: 206K
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.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
