Gold holds gains but stays below $2,500 ahead of US jobs data

XAU/USD rises 0.05% to $2,493, with prices rebounding after hitting a daily low of $2,471.
Weaker-than-expected US JOLTS report fuels speculation of a 50 bps Fed rate cut in September.
Falling US Treasury yields and a softer US Dollar support Gold despite volatile profit-taking throughout the session.

Gold's price aimed higher during the North American session after weaker-than-expected jobs data in the United States (US) increased the odds for a 50-basis-point (bps) rate cut by the Federal Reserve (Fed). Additionally, US Treasury bond yields dropped and undermined the Greenback, which is inversely correlated to the golden metal. Therefore, the XAU/USD trades at $2,493, up by a minimal 0.05%.

Bullion prices had been seesawing throughout the day, mainly driven by traders booking profits, which pushed the golden metal toward a daily low of $2,471. Lately, Gold recovered some ground as the US Bureau of Labor Statistics (BLS) revealed its latest Jobs & Labor Turnover Survey (JOLTS), showing vacancies dropped to their lowest level since January 2021.

Following the data, US Treasury bond yields fell, shown by the yield on the 10-year benchmark note that is down almost six bps to 3.776%. Traders increased their bets that the Fed might lower interest rates aggressively on fears that they are behind the curve.

According to CME FedWatch Tool data, odds for a 50 bps at the September meeting rose to 43%, almost a flip of a coin. The next Federal Open Market Committee (FOMC) meeting will be held on September 17-18.

The US Dollar Index (DXY), which tracks the performance of six currencies against the Greenback, dropped 0.37% to 101.38 after recovering from a year-to-date (YTD) low and rose almost 1.30% during the last six days.

Market sentiment remains negative, blamed on stock rotation amid fears of a recession in the US.

In the meantime, Gold traders prepare for another round of US jobs data. The ADP National Employment Change, Initial Jobless Claims, and the Nonfarm Payrolls (NFP) report are set to be released later in the week.

Daily digest market movers: Gold price traders await busy US economic calendar

US BLS revealed that the number of job openings in July tanked compared to June’s downwardly revised data via the JOLTS report. Vacancies dropped from 7.910 million to 7.673 million.
In other data, Factory Orders for July exceeded estimates of 4.7%, climbing sharply to 5% and crushing June’s -3.3% contraction.
US Business activity in the manufacturing sector improved but remained in contractionary territory.
Private hiring, revealed by the ADP National Employment Change report, was estimated to increase from 122K in July to 150K in August.
August’s NFP figures are expected to rise from 114K to 163K, while the Unemployment Rate could dip, according to the consensus, from 4.3% to 4.2%.
December 2024 Chicago Board of Trade (CBOT) fed funds future rates contract hints that investors are eyeing 106 basis points of Fed easing this year.

Technical outlook: Gold price hovers around $2,500

Gold price's uptrend resumed on Wednesday as a ‘tweezers bottom’ chart pattern emerges, yet buyers need to clear a key resistance level that could sponsor a retest of the YTD high. Momentum, as measured by the Relative Strength Index (RSI), hints that buyers are in charge but turned flat in the near term.

If buyers achieve a daily close above $2,500, the next resistance would be the all-time high (ATH) at $2,531, followed by the $2,550 mark. A breach of the latter will expose $2,600.

Conversely, if XAU/USD stays below $2,500, the next support would be the August 22 low at $2,470. Once hurdled, the next demand zone would be the confluence of the April 12 high turned support and the 50-day Simple Moving Average (SMA) near $2,431.

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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.

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