Gold Prices Rise Amid Interest Rate Cut Expectations

Gold prices surged by over 1%, reaching nearly $2,393, driven by mixed US Nonfarm Payroll data and increased speculation about a potential Federal Reserve rate cut.

Gold 4-hour chart

Gold 4-hour chart

The release of June’s US Nonfarm Payrolls report was a pivotal moment for gold prices, sparking a rally during the mid-North American session. The report, which surpassed forecasts but revealed downward revisions for the two previous months, hinted at a faster-than-expected cooling of the labour market. This led traders to anticipate a Federal Reserve rate cut in September. This factor pressured the US dollar and bolstered gold prices. The price rebounded from daily lows of $2,349 on Friday, partly due to a weaker US dollar, which was undermined by lower US Treasury bond yields. These factors, particularly the Nonfarm Payrolls report, played a significant role in the upward movement of gold prices.

June’s US Nonfarm Payrolls data were positive. However, downward revisions for April and May indicated that the economy added 111K fewer jobs than initially reported. As a result, the unemployment rate increased by one-tenth of a percentage point in June, surpassing expectations.

Geopolitical factors also continued to influence gold prices. Israeli Prime Minister Benjamin Netanyahu sent a delegation to advance hostage negotiations and reiterated that the war would not end until Israel achieved all its objectives. Meanwhile, a Hamas leader stated, according to CNN, that they are awaiting a positive response from Israel to begin negotiating the details of a deal. These geopolitical tensions added further support to gold prices.

From a technical perspective, caution is advised in the current gold market. While Gold has been moving in a bullish market structure since the start of July, seeking higher prices and trying to reach the high formed during May 2024, the current price position is not ideal for strong long positions as the price surge has been significant, and searching for short positions would go against the trend, consider the price adjustment probability. Therefore, we could wait for the price to retrace to the previous support level and, with wick rejections or signs of reversal, consider long positions from the support level. This cautious approach is key in the current market conditions.

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