Gold Prices Surge to $2,387 as Weak US Dollar and Fed Rate Cut Loom; Brace for US Nonfarm Payroll

Gold prices (XAU/USD) have continued their upward momentum, holding firm around the $2,339 mark and peaking at $2,387 during intraday trading.

GOLD Price Chart - Source: Tradingview

This surge is closely tied to the weakness of the US dollar, which has been losing ground amid growing expectations of a potential interest rate reduction by the Federal Reserve in September. However, the market sentiment favoring a rate cut, which has been reinforced by lackluster macroeconomic indicators from the United States.

Market participants are closely monitoring the upcoming release of the highly anticipated monthly employment data from the United States (US). The Nonfarm Payrolls (NFP) report, widely followed by traders, is expected to have a significant impact on the Federal Reserve’s (Fed) future monetary policy choices.

Weak US Dollar and Fed Rate Cut Expectations Drive Gold Gains

On the other side, the US dollar experienced a decline, largely driven by the release of lackluster macroeconomic data from the United States. This has further solidified expectations that the Federal Reserve will initiate interest rate cuts in the coming months. Consequently, market sentiment is leaning towards an imminent rate reduction by the Fed in response to signs of economic deceleration.

As a result, expectations of a dovish stance from the Fed are keeping both US Treasury bond yields and the value of the US dollar subdued, hovering near multi-week lows.

On the data front, the US Department of Labor (DoL) recently reported an unexpected increase in the number of Americans filing for unemployment benefits, with claims rising to 229,000 for the week ending June 1. This data, along with the ADP’s report on private-sector employment, suggests a slowing US labor market.

These indicators have reinforced expectations for a Federal Reserve rate cut in September and have contributed to a decline in US Treasury bond yields. Looking ahead, the upcoming Nonfarm Payrolls (NFP) report is projected to show an addition of 185,000 jobs in May, up from 175,000 the previous month, with the unemployment rate expected to remain steady at 3.9%.

Increasing Tension In Gaza Spurs Demand for Safe-Haven Assets

On the geopolitical front, the recent Israeli attack on a UN-operated school in central Gaza has resulted in at least 40 fatalities, including children and women, and left dozens injured. The Israeli military stated that the strike targeted and killed Hamas fighters at the school. The Gaza Health Ministry reported that in the past 24 hours, at least 68 Palestinians have been killed and 235 have been wounded.

Meanwhile, Spain announces its intention to join South Africa’s case against Israel at the International Court of Justice, accusing it of genocide. Since October 7, Israel’s war on Gaza has claimed 36,654 lives and injured 83,309.

Therefore, the geopolitical tensions from the Israeli attack and ongoing conflict in Gaza, along with Spain joining a genocide case against Israel, are likely to increase gold prices as investors seek safe-haven assets.

Gold Technical Outlook

Gold prices are currently trading at $2373.21, reflecting a slight decline of 0.12%. The key pivot point is marked at $2387.24, which is crucial for today’s trading. Immediate resistance levels are positioned at $2406.55, $2428.05, and $2446.26, indicating potential upward barriers. On the downside, the immediate support levels are found at $2362.46, $2342.78, and $2315.46, providing key points where buyers might step in.

GOLD Price Chart

The technical indicators suggest a cautious outlook for gold. The Relative Strength Index (RSI) is currently at 59, showing a balanced market sentiment without a clear overbought or oversold condition. The 50-Day Exponential Moving Average (EMA) is positioned at $2346.95, which serves as a significant support level. A break below this EMA could indicate further bearish trends.

Considering the current technical setup, traders might consider an entry point for a sell position below $2385. The suggested take profit target is $2350, with a stop loss at $2405, offering a risk-to-reward ratio of 1:75. This strategy is designed to capitalize on the potential downside while minimizing risks.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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