Weakening US Employment Keeps Gold Price in Range
Since May 24, Gold prices have been consolidating after reaching a record high of $2,450, with poor US employment is providing bids.
Since May 24, Gold prices have struggled to maintain their upward trajectory. After reaching a record high of $2,450 on May 20, XAU/USD reversed course and has been trading in the lower half of the $2,300 range. Moving averages have been acting as resistance, preventing a return to higher levels.
However, recent poor US employment figures have increased the likelihood of a Federal Reserve rate cut in the near future. These expectations have softened the USD, providing support for gold prices. This relationship was evident in the surge in gold prices following the disappointing ADP employment report for May.
GOLD prices have demonstrated resilience despite encountering resistance at key moving averages, particularly the 100-day Simple Moving Average (SMA). The stronger-than-expected US ISM services data yesterday failed to suppress gold prices which started to bounce, indicating robust buying demand at the lower end of the trading range. This demand was further evidenced by gold’s rise following disappointing US ADP labor market data, which bolstered expectations of a near-term Federal Reserve interest rate cut.
Gold Chart H4 – Gold Waiting for the NFP Report on Friday
Gold Price Analysis
Gold Support and Resistance Levels:
- Gold prices have been finding resistance at the 100 SMA, with this level acting as a barrier to further upward movement. The soft labor market data and increased likelihood of Fed rate cuts have supported gold prices, as seen in the recent 1% rise. Traders should monitor the 100 SMA and other moving averages for potential resistance, as well as any upcoming economic data releases that could influence Fed policy expectations. Yesterday we decided to open a sell Gold signal below the 100 SMA (green).
Recent Price Action
- Spot gold rose more than 1% to $2,357.40 per ounce during the US session on Wednesday, recovering the previous day’s losses. Should labor market data continue to disappoint and rate cut expectations solidify, gold could see further gains, potentially overcoming resistance levels like the 100 SMA.
Labor Market Data:
- The US labor market is showing signs of weakness. The April Job Openings and Labour Turnover Survey (JOLTS) reported a significant decline in job openings, dropping by 296,000 to 8.059 million, the lowest in over three years. Additionally, the ADP employment figures fell to 152,000 from a revised 188,000, missing expectations of 177,000. The recent lackluster labor market data from the US, including the significant drop in job openings and the lower-than-expected ADP employment numbers, underscore a declining trend in the labor market, which is weighing on the USD, thus keeping XAU/USD supported.
Conclusion:
Gold prices are benefiting from the current economic context, with weaker US labor market data reinforcing the likelihood of Federal Reserve rate cuts. This environment is favorable for gold, as a softer USD increases its attractiveness. Traders and investors should keep a close eye on labor market indicators and Fed communications for further cues on gold’s direction.
Gold Live Chart
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