- Gold reached a high of $2,310 before retracing its gains, failing to exceed the May 2 peak of $2,326.
- The disappointing US Nonfarm Payrolls report resulted in decreased real yields and reduced the safe-haven allure of gold.
- Meanwhile, Federal Reserve officials’ statements present a mixed picture, with Governor Bowman expressing readiness to raise rates.
Following the US Bureau of Labor Statistics (BLS) report revealing a shortfall in April’s Nonfarm Payrolls, signaling a cooling job market, gold relinquished its earlier gains on Friday. Despite briefly inching toward its peak of $2,310, achieved earlier in the day, it failed to breach the high of May 2 at $2,326, triggering a retreat to current spot prices.
As of now, XAU/USD is trading at approximately $2,300, displaying minimal change with a slight decrease of 0.02%. The upbeat sentiment prevailing on Wall Street is dampening the appeal of the non-yielding metal as a safe haven. Notably, US Treasury yields are on a downward trajectory, with the 10-year benchmark note dropping by seven basis points. Meanwhile, US real yields, which typically move inversely to gold prices, registered a decline of six and a half basis points, sliding from 2.219% to 2.146%.
A ‘Goldilocks’ scenario appears to be unfolding in the US following the NFP report, as data from the Institute for Supply Management (ISM) indicated a contraction in business activity in the services sector for the first time since December 2022.
In other developments, a slew of Federal Reserve (Fed) officials made statements. Fed Governor Bowman adopted a hawkish stance in an interview with Bloomberg Television, expressing readiness to raise rates if inflation stalls or reverses. Meanwhile, Austan Goolsbee of the Chicago Fed characterized the latest US employment report as robust, emphasizing the current restrictive nature of monetary policy.
Daily digest market movers: Gold dwindles around $2,300 amid falling US yields
- Gold prices are supported by lower US Treasury yields and a weakened US Dollar. The yield on the US 10-year Treasury note has decreased by seven basis points to 4.506% since opening. Meanwhile, the US Dollar Index (DXY), which measures the Dollar against six other currencies, has declined by 0.29% to 105.04.
- In April, the US Department of Labor reported that Nonfarm Payrolls increased by just 175,000 jobs, falling short of the forecasted 243,000 and March’s revised figure of 315,000. The Unemployment Rate inched up from 3.8% to 3.9%, while Average Hourly Earnings (AHE) grew by only 0.2%, below the expected 0.3%.
- Additionally, the ISM April Services PMI dropped below the pivotal 50.0 mark, indicating contraction, with a reading of 49.4, lower than expected and below March’s figure. Within the report, the Employment subcomponent showed a slowdown, while Prices Paid increased.
- Following the release of this data, the probability of a Fed rate cut has risen, with traders anticipating a total of 38 basis points of cuts by the year’s end. The first rate cut is projected for September, with an 87% likelihood of a 0.25% reduction. There’s also a 79% chance of another 0.25% cut in December 2024, bringing the fed funds rate to the 4.75%-5.00% range by year-end.
Technical analysis: Gold price drops but stays above $2,300
Gold prices maintain an upward bias, trading within the $2,280 to $2,340 range throughout the week. Momentum favors a potential continuation of the uptrend, as indicated by the Relative Strength Index (RSI) positioned above the 50 midline. However, there are downside risks if XAU/USD drops below $2,300.
Should buyers successfully uphold the price above $2,300, the initial resistance lies at $2,330. A breakthrough would target the April 26 high of $2,352, potentially paving the way towards $2,400. Further upside targets include the April 19 high at $2,417 and the all-time high of $2,431.
Conversely, a bearish scenario may unfold if gold sellers push prices below $2,300, triggering a pullback towards the April 23 daily low of $2,291. Subsequent losses could extend beneath the March 21 daily high-turned-support at $2,223, followed by $2,200.
