Gold Price Forecast: Uncertain US Jobs Data Raises Doubts on Rate Hike Path

Highlights

• Gold prices remain stable after US jobs data raises doubts on labor market, rate trajectory. 
• Dollar decline and disappointing nonfarm payrolls contribute to gold’s weekly gain.
• Countries repatriating gold as protection, while speculators increase net long positions.

Overview

Comex Gold prices are edging lower on Monday, following last week’s release of U.S. jobs data, which cast doubts on the strength of the labor market. This uncertainty led investors to question the Federal Reserve’s trajectory for interest rate hikes. However, gold prices experienced a rise on Friday, putting them on track for their first weekly gain in four weeks. This increase was attributed to a decrease in the value of the dollar and bond yields after disappointing nonfarm payrolls numbers were released.

US Job Growth Slows, Wages Rise

The Labor Department’s employment report revealed that the U.S. economy added the fewest jobs in 2-1/2 years in June. Despite this, the report also highlighted persistently strong wage growth, indicating a relatively tight labor market. While nonfarm payrolls fell short of expectations, the unemployment rate dropped from a seven-month high, accompanied by substantial wage gains.

Traders Eyeing Treasury Yields, US Dollar

As a result of the data, benchmark 10-year U.S. Treasury yields retreated from a four-month peak, and the dollar declined by 0.9%, reaching a two-week low. This made gold more appealing for holders of other currencies. Although traders still anticipated an interest rate hike by the Federal Reserve this month, they were growing increasingly skeptical about the possibility of further hikes in the future.

Gold’s performance is highly sensitive to interest rate changes, as higher rates diminish the appeal of the precious metal, which offers no interest. Consequently, gold prices have declined by over 7% since reaching near-record levels in early May, as investors adjusted their expectations regarding the conclusion of the Federal Reserve’s rate-hiking cycle.

Gold Repatriation Grows

Despite this downward trend, a recent survey conducted by Invesco revealed that an increasing number of countries are repatriating gold reserves as a protective measure against potential sanctions imposed by Western nations, as seen in the case of Russia.

Speculators Increase Net Long Positions

In related news, data from Friday indicated that COMEX gold speculators increased their net long positions, while holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, experienced a slight decrease of 0.3%.

US CPI Data to Set the Tone

Looking ahead, market participants will closely monitor upcoming Consumer Price Index (CPI) data on July 12, as a significant miss could potentially alter the current expectations surrounding a July rate hike by the Federal Reserve.

Technical Analysis

Comex Gold sentiment is currently slightly bearish. The price remains unchanged at 1925.80, aligning with the previous 4-hour close. While the price is above the 50-4H moving average, indicating short-term strength, it is below the 200-4H moving average, suggesting a potential bearish signal. The 14-4H RSI stands at 54.28, close to the neutral level of 50, indicating a balanced market sentiment.

The main support area lies between 1908.50 and 1900.60, while the main resistance area ranges from 1943.20 to 1949.00. Traders should monitor the price’s behavior within the main resistance area for further indications of a bullish breakout or a bearish reversal. Traders should also monitor the price action around the 50-4H moving average at $1924.10. Trader reaction to this level could determine the near-term trend.