News & Analyses

Gold price rebounds on downbeat NFP data, eyes on Fedspeak

  • Gold price attracts some buyers amid the weaker USD on Monday. 
  • The growing expectations that the Fed will start cutting interest rates later in the year lifted the yellow metal. 
  • The easing Middle East tensions and risk-on mood might cap the gold’s upside. 

Gold price (XAU/USD) snaps the two-day losing streak during the European session on Monday. The weaker-than-expected US employment reports have boosted the odds of a September rate cut from the US Federal Reserve (Fed). This, in turn, has dragged the US Dollar (USD) lower and lifted the USD-denominated gold. It’s worth noting that a lower interest rate can decrease the opportunity cost of investing in gold, leading to higher demand and price. 

On the other hand, the easing fear of geopolitical tensions in the Middle East, particularly the Iran-Israel conflict and the risk-on environment might undermine demand for safe-haven assets and cap the yellow metal’s upside. Gold traders will keep an eye on Fedspeak this week. Fed’s Thomas Barkin and John Williams are set to speak on Monday. The dovish message from Fed officials might further boost the XAU/USD. 

Daily Digest Market Movers: Gold price recovers some lost ground amid downbeat US data

  • The US Nonfarm Payrolls (NFP) rose by 175K in April from 315K in March (revised from 303K), missing the market expectation of 243K. 
  • The Unemployment Rate rose to 3.9% in April from 3.8% in the previous reading, while the Average Hourly Earnings dropped to 3.9% YoY in April from 4.1% in March.
  • The US ISM Services PMI slipped into contractionary territory, falling from 51.4 in March to 49.4 in April, below the market estimate of 52.0.
  • Fed Governor Michelle Bowman cautioned that there is a real risk that inflation could remain elevated for much longer than many are expecting, adding that she’s willing to hike rates if inflation stalls or reverses.
  • Chicago Fed Austan Goolsbee stated that the latest US employment report was solid, emphasizing that current monetary policy is restrictive.
  • Fed easing expectations have adjusted, with the odds of a September rate cut rising to nearly 90%, up from 55% ahead of the NFP report, according to the CME FedWatch tool. 

Technical Analysis: Gold price remains confined within a descending trend channel in the near term

Gold price trades on a stronger note on the day. The bullish outlook of the precious metal remains intact, as XAU/USD is above the key 100-day Exponential Moving Average (EMA) on the daily chart. 

In the near term, the gold price has remained capped within a descending trend channel since mid-April, suggesting that further consolidation cannot be ruled out. Additionally, the 14-day Relative Strength Index (RSI) hovers around the 50 midline, indicating indecisiveness among market players. 

The first upside barrier for the yellow metal will emerge near the 100-EMA at $2,318. A decisive break above the mentioned level would resume the positive outlook in the short term. The next hurdle is seen at the $2,350–$2,355 region, portraying the confluence of a high of April 26 and the upper boundary of a descending trend channel. A bullish breakout above this level will expose the $2,400 mark en route to an all-time high near $2,432. 

On the downside, any follow-through selling below the $2,300 psychological mark will see a drop to a low of May 3 and the lower limit of a descending trend channel at $2,275. Further south, the next contention level is located near a low of April 1 at $2,228, followed by the $2,200 round mark. 

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.

USD   -0.03% -0.11% -0.11% -0.17% 0.13% -0.05% -0.01%
EUR 0.03%   -0.08% -0.08% -0.14% 0.15% -0.02% 0.02%
GBP 0.12% 0.10%   0.01% -0.04% 0.25% 0.08% 0.12%
CAD 0.11% 0.08% 0.00%   -0.07% 0.25% 0.05% 0.10%
AUD 0.17% 0.15% 0.07% 0.07%   0.30% 0.12% 0.17%
JPY -0.14% -0.15% -0.23% -0.23% -0.28%   -0.14% -0.15%
NZD 0.05% 0.02% -0.05% -0.05% -0.12% 0.18%   0.04%
CHF 0.01% -0.02% -0.11% -0.10% -0.17% 0.15% -0.05%  

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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Gold FAQs

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.

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.

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.

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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