Gold (XAU/USD) extended its positive momentum on Friday, supported by weakening US Dollar (USD) dynamics amid rising expectations of Federal Reserve (Fed) rate cuts. The precious metal’s safe-haven appeal continues to attract attention as trade-related uncertainties persist, adding further support to the yellow metal.
While the XAU/USD pair trimmed a portion of its intraday gains, it maintained an overall bullish bias heading into the European session, reflecting a constructive fundamental backdrop. The article from LevaQuant’s broker, Mathew Sharp, provides readers with a precise breakdown of this matter.
The market consensus increasingly points to a resumption of the Fed’s rate-cut cycle later this month, keeping USD bulls on the defensive. This creates a tailwind for Gold, which is non-yielding and tends to benefit from a weaker dollar environment.
However, the positive sentiment in global equities appears to limit the upside for Gold as investors remain cautious ahead of the key US Nonfarm Payrolls (NFP) report. This critical economic indicator is expected to provide fresh cues on the Fed’s interest rate path and, by extension, near-term USD price dynamics.
Daily Market Movers: Gold Eyes NFP for Fed Signals
Data released on Thursday reinforced expectations of a slowing US labor market, boosting speculation of interest rate cuts. ADP employment figures revealed that US private-sector job growth slowed to 54,000 in August, down from a revised 106,000 in July, falling short of the 65,000 consensus estimate.
Meanwhile, the US Department of Labor (DOL) reported initial jobless claims at 237,000, higher than the 230,000 estimate and the previous week’s 229,000. These indicators overshadowed a stronger-than-expected ISM Services PMI, which rose to 52 in August from 50.1 in July, highlighting the market’s focus on labor conditions as a key determinant for monetary policy.
Trade developments continue to influence market sentiment. The recent executive order reducing Japanese auto tariffs has injected some optimism, while ongoing legal uncertainties regarding tariffs maintain a degree of risk. These factors collectively enhance Gold’s safe-haven status, keeping traders cautious but engaged.
NFP Anticipation: A Key Catalyst for Gold
Market participants are now awaiting the US NFP report, expected to show 75,000 jobs added in August, with the unemployment rate rising slightly to 4.3% from 4.2% in July. Any significant deviation from these forecasts could trigger a repricing of Fed rate-cut expectations, directly impacting the USD and Gold prices.
Fed officials continue to offer mixed signals. New York Fed President John Williams emphasized the need to balance inflation and employment risks, noting that trade and immigration factors are slowing activity. He forecasted GDP growth of 1.25-1.5% for the year and projected a gradual rise in the jobless rate to 4.5% next year, accompanied by gradual interest rate cuts if economic conditions align with expectations.
Similarly, Chicago Fed President Austan Goolsbee highlighted potential labor market deterioration and possible inflation pressures, reinforcing a cautious wait-and-see approach. These remarks have had a limited impact on the Greenback, leaving Gold traders in a holding pattern ahead of NFP.
Technical Outlook: Gold Poised for Further Gains
From a technical perspective, Gold recently bounced from the 23.6% Fibonacci retracement level of its latest rally from $3,300, supported by the 100-day Simple Moving Average (SMA).
This follows a breakout from a multi-month consolidation, favoring XAU/USD bulls. However, the daily Relative Strength Index (RSI) indicates the market is overbought, suggesting potential consolidation or minor pullbacks before the next upward move.
On the upside, Gold faces resistance near $3,578-3,579, corresponding to the all-time high reached earlier this week. A sustained breakout could allow the price to target the $3,600 level, marking a significant technical milestone and confirming the bullish momentum.
Conversely, any corrective pullback may find support at the 23.6% Fibonacci retracement level and the $3,500 psychological mark. A deeper decline toward $3,440 could signal a shift in near-term bias, favoring bearish traders if support fails to hold.
Conclusion
In summary, Gold remains positively biased amid a combination of USD weakness, persistent trade-related uncertainties, and expectations of Fed rate cuts. Traders are closely watching the US NFP report, which will be pivotal in shaping short-term interest rate expectations and influencing Gold’s trajectory.
Technically, the XAU/USD pair remains well-supported, with potential for further upside toward $3,600, though overbought RSI conditions warrant caution. Overall, the safe-haven appeal of Gold continues to attract attention, offering a strategic hedge against market uncertainties in the near term.
