Gold Prices Forecast: Bullish XAU/USD Outlook Persists Despite Profit-Taking

Gold Retreats After Rally on US Jobs Data

Gold prices slipped on Monday as investors booked profits following Friday’s surge to a one-month high. The precious metal’s movements were driven by the latest US employment report, which strengthened expectations of a Federal Reserve interest rate cut in September.

At 11:00 GMT, XAU/USD is trading $2374.04, down $17.59 or -0.74%.

Key Employment Figures and Impact

The US economy added 206,000 jobs in June, slightly above the 190,000 forecast. However, substantial downward revisions for April and May suggest a broader trend of slowing job growth. The unemployment rate rose to 4.1%, its highest level since November 2021. These signs of labor market weakness increased the likelihood of Fed rate cuts, supporting gold prices.

Labor Market Cooling and Gold

The cooling labor market, evidenced by job losses in retail and manufacturing sectors, reinforces the narrative of economic slowdown. This scenario typically benefits gold as investors seek safer assets during uncertain economic times.

Wage Growth Moderation

Annual wage growth slowed to 3.9%, the lowest rate since June 2021. This moderation eases inflationary pressures, potentially allowing the Fed more flexibility to cut rates. Lower rates reduce the opportunity cost of holding non-yielding gold, making it more attractive to investors.

Rate Cut Expectations Boost Gold

Financial markets are pricing in a 72% probability of a Fed rate cut in September. This expectation is a key driver for gold prices, as lower interest rates generally support higher gold valuations.

Dollar Weakness

The US dollar weakened to a three-week low against major currencies following the jobs report. A weaker dollar makes gold more affordable for holders of other currencies, further supporting its price.

Market Forecast

The short-term outlook for gold remains bullish despite Monday’s pullback. If the Fed signals a September rate cut, traders may target gold’s all-time high of $2,450. However, investors should be prepared for volatility as markets react to ongoing economic data and central bank communications.

Technical Analysis

XAU/USD is in a bullish position after crossing to the strong side of the 50-day moving average at $2340.95, which is new support. A trade through $2392.97 will signal a resumption of the short-term uptrend. If this creates enough upside momentum then look for a clean shot at a new record high through $2450.13.