- At the end of last week's trading, gold prices jumped to a six-week high after US employment data indicated a gradual slowdown in the labor market, reinforcing expectations of interest rate cuts in the coming months.
- According to gold trading platforms, bullion prices rose 1.4% to $2,392.35 per ounce.
- Also, US stocks rose in New York on Friday thanks to data from the US Bureau of Labor Statistics showing a decline in employment and wage growth in the United States in June while the unemployment rate rose.
Commenting on this, Ole Hansen, commodity market analyst at Saxo Bank A/S, said that the new figures "keep the possibility of a September interest rate cut alive." Swap traders now put a 75% chance of a US interest rate cut within two months. The analyst added, "After the strong rise last week, further gains may be limited in the absence of many traders" and in the United States after the public holiday on Thursday.
Gold has been in a relatively tight trading range for most of the past month but jumped 2.7% last week as expectations of a September interest rate cut mounted. Also, silver advanced 3.3%, while platinum and palladium also rose. The Bloomberg Dollar Spot Index and 10-year Treasury yields were on track for weekly declines.
Supporting gold’s recent strong gains was the US dollar fell after a report on the US labor market showed conditions continued to slow, boosting expectations of a rate cut by the Federal Reserve at its September policy meeting. Furthermore, the Bureau of Labor Statistics cut its previous estimate for US job growth in April and May by 111,000 and said the unemployment rate in the country rose to 4.1% in June. Moreover, the official nonfarm payrolls report for June fell to 206,000 from 272,000, but that beat estimates of 190,000. However, the reaction of the currency and bond markets suggests that the focus is shifting away from the previous two months’ review and the unemployment rate.
The result is that the US labor market is loosening, which is consistent with the decline in wage growth that will weigh on inflation going forward, allowing the Federal Reserve to cut interest rates, perhaps as soon as September. In fact, the Bureau of Labor Statistics also reported that average hourly earnings rose 3.9% on an annual basis, the lowest level in three years.
Ahead of the data, US Federal Reserve Chairman Jerome Powell said at a conference in Portugal that the Fed would consider cutting US interest rates if the labor market deteriorated. Overall, the US jobs report is the latest in a series of soft economic publications. On Wednesday, the dollar fell after the release of the ISM services PMI, which came well below expectations. As such, currency analysts say the US dollar could come under continued pressure when the Fed appears to be entering a sustained period of rate cuts. However, the complicated factors for such an assumption include the US elections in November. Already, we have seen markets vote that the increasing chances of a Trump presidency support the US dollar.
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Gold Price Forecast and Analysis Today:
According to the performance on the daily chart attached, the general trend for gold price is getting stronger and the bulls’ chance to move towards the psychological resistance of $2400 per ounce is strongly expected. Technically, it may exceed more than that if the US inflation figures come in below expectations and Jerome Powell’s statements this week calm the path of tightening the US Federal Reserve policy. Moving towards the resistance of $2400 per ounce will move the technical indicators towards strong overbought levels and if the US dollar gains return, gold price may be exposed to profit-taking operations. As we mentioned before, the gold market is receiving strong positive momentum from other factors, more global central bank purchases of gold in addition to increasing global geopolitical tensions, which is a fertile environment for more gold gains. Therefore, we still prefer to buy gold from every downward level.
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