Gold price extends the range play below one-week high ahead of US ADP report

Gold price struggles to attract any meaningful buyers amid a combination of diverging forces.
A modest USD bounce from a multi-year low and a positive risk tone caps the XAU/USD pair.
Fed rate cut bets keep a lid on the USD and support the XAU/USD pair amid trade uncertainties.

Haresh Menghani FXStreet

Gold price (XAU/USD) seesaws between tepid gains/minor losses through the first half of the European session on Wednesday and remains below a one-week high touched the previous day. The USD gains some positive traction and for now, seems to have snapped a seven-day losing streak to its lowest level since February 2022, which, in turn, acts as a headwind for the commodity. Apart from this, a positive risk tone is seen as another factor capping the upside for the safe-haven precious metal.

Meanwhile, investors remain on edge in the wake of persistent uncertainties surrounding US President Donald Trump's tariff policies. Furthermore, expectations that the US Federal Reserve (Fed) will resume its rate-cutting cycle in the near future, along with concerns about the fiscal implications of US President Donald Trump's sweeping tax and spending cut bill, cap the USD. This, in turn, helps limit the downside for the non-yielding Gold price ahead of the US ADP report later today.

Daily Digest Market Movers: Gold price traders seem non-committed amid mixed fundamental cues

The US Dollar stages a modest bounce from over a three-and-a-half-year low touched on Tuesday and fails to assist the Gold price to build on a two-day-old recovery from a nearly one-month low touched earlier this week.
Comments from Federal Reserve Governor Michelle Bowman and fellow Governor Christopher Waller suggested that the US central bank could consider cutting interest rates as early as the July monetary policy meeting.
Meanwhile, Fed Chair Jerome Powell said on Tuesday that the US central bank would have eased monetary policy by now if not for the highly uncertain economic path created by US President Donald Trump’s tariff policies.
When asked if July would be too soon for markets to expect a rate cut, Powell answered that it’s going to depend on the data. Nevertheless, traders are pricing in over a 20% chance that the Fed will cut rates at the July meeting.
More significantly, there is a nearly 75% probability of a 25 basis point rate reduction by the Fed at the September monetary policy meeting. This caps any further USD recovery and supports the non-yielding yellow metal.
On the economic data front, the Institute of Supply Management (ISM) reported on Tuesday that economic activity in the US manufacturing sector contracted for the fourth consecutive month, though at a slower pace in June.
Separately, the Job Openings and Labor Turnover Survey (JOLTS) revealed that the number of job openings stood at 7.769 million on the last business day of May, up from 7.395 million in April and 7.3 million anticipated.
Wednesday's US economic docket features the release of the ADP report on private-sector employment, which might influence the USD and the XAU/USD pair ahead of the official Nonfarm Payrolls (NFP) report on Thursday.
Trump threatened to impose higher tariffs on Japanese imports over the latter's alleged unwillingness to buy American-grown rice. This comes ahead of the July 9 deadline for Trump's reciprocal tariffs and fuels uncertainty.

Gold price bulls need to wait for strength beyond the $3,355-3,358 hurdle before placing fresh bets

Bulls might now wait for a move beyond the overnight swing high, around the $3,358 region, before placing fresh bets around the Gold price. The subsequent move up should allow the commodity to reclaim the $3,400 round-figure mark. A sustained strength beyond the latter would negate any near-term negative outlook and shift the bias in favor of the XAU/USD bulls.

On the flip side, weakness below the $3,329-3,328 region (Asian session low) could find support near the $3,300 mark. This is followed by the $3,277-3,276 horizontal zone and the weekly trough, around the $3,246-3,245 region. A convincing break below the latter would make the Gold price vulnerable to accelerate the fall to the $3,210-$3,200 support en route to the $3,175 area.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

(This story was corrected on July 02 at 08:04 GMT to say in the US Nonfarm Payrolls (NFP) report is scheduled on Thursday, not Friday)

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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