- Gold tumbles after failing to breach the $2,531 resistance, closing at $2,493 amid growing speculation about a Fed rate cut.
- US Nonfarm Payrolls fell short of estimates, but stronger figures and rising hourly earnings increased uncertainty over whether the Fed will implement a 25 or 50 basis point cut.
- Despite declining Treasury yields, the US Dollar Index rebounded above 101.00, putting additional pressure on gold prices.
Gold prices retreated after failing to test the all-time high of $2,531, falling more than 0.80% late in the North American session to trade at $2,493, having peaked at $2,529. The pullback occurred as US economic data raised uncertainty about whether the Federal Reserve (Fed) will implement a 25 or 50 basis point (bps) rate cut at the September meeting.
The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) for August fell short of estimates but improved from July’s revised figures. The Unemployment Rate decreased from the previous month, while Average Hourly Earnings increased.
Market expectations for a Fed rate cut fluctuated significantly. According to CME FedWatch Tool data, traders initially priced in a 50 bps cut with probabilities rising as high as 70%. However, as the data settled, the odds shifted, with a 25 bps cut becoming more likely at 73%, while the probability for a 50 bps cut dropped to 27%.
Fed officials weighed in, with New York Fed President John Williams suggesting that a rate cut would help balance the labor market. Fed Governor Christopher Waller also supported easing, stating that "the time has come" and expressing openness to various easing sizes. Additionally, Chicago Fed President Austan Goolsbee indicated strong consensus among policymakers for reducing borrowing costs.
Despite falling US Treasury yields, gold prices dropped as the US Dollar Index (DXY) recovered from below 101.00 to gain over 0.15%, reaching 101.22.
In geopolitical news, US Secretary of State Antony Blinken mentioned that while 90% of the Gaza ceasefire agreement is settled, critical issues remain unresolved, urging both parties to address these gaps.
Daily Market Movers:
- US NFP increased by 142K in August, missing the forecast of 160K. July's figures were revised down from 114K to 89K.
- The Unemployment Rate fell from 4.3% to 4.2%, and Average Hourly Earnings rose from 3.6% to 3.8% YoY in August.
- Data from the Chicago Board of Trade indicates expectations for a Fed cut of at least 104 bps this year, up from 103 bps a day earlier, based on the December 2024 fed funds rate futures contract.
Technical Outlook:
Gold prices, although generally upwardly biased, have shifted to a negative short-term outlook. After XAU/USD peaked above $2,520, it reversed and formed a “bearish engulfing” candle pattern, suggesting further losses.
The Relative Strength Index (RSI) has turned bearish and is nearing a drop below its neutral level. If XAU/USD falls below the August 22 low of $2,470, further downside is likely, with the next support zone between $2,435 and $2,431, where the April 12 high and the 50-day Simple Moving Average (SMA) converge.
Conversely, if prices rise above $2,500, the next resistance levels are the year-to-date high of $2,531, followed by the psychological $2,550 level and then $2,600.
