The gold price dropped following a robust US jobs report that indicated a healthy labor market and reduced the pressure on the Federal Reserve (Fed) to ease policy in 25-basis-point increments. The XAU/USD was trading at $2,643, down 0.40%, after the US Bureau of Labor Statistics revealed positive September jobs data. This pushed the US 10-year T-note yield to 3.971%, reaching levels last seen in mid-August 2024 and the US Dollar Index to 102.58, capping the rise in gold prices.
Traders reacted to the data by projecting a 25 bps rate cut by the Fed at the upcoming November meeting, with Chicago Fed President Austan Goolsbee expressing confidence in the US labor market. The upcoming week will feature the release of inflation data, jobless claims, and University of Michigan Consumer Sentiment. Geopolitical risks involving Israel, Iran, and the US may support gold prices and potentially push the metal to $2,700.
Market participants are disregarding a 50 bps rate cut from the Fed, with a 95% probability of a 25 bps cut and a 5% chance of holding rates unchanged, according to the CME FedWatch Tool data. The jobless claims increased by 254K in September, surpassing estimates and pushing the Unemployment Rate down to 4.1%. Average Hourly Earnings rose 0.4% MoM and 4% in the 12 months to September, exceeding estimates.
Gold’s price has consolidated near $2,640-$2,670 for five consecutive days, with the Relative Strength Index exiting overbought territory. Price action remains range-bound, and a daily close below $2,650 may lead to a drop towards the $2,600 level. On the other hand, a bullish continuation would require XAU/USD to clear $2,670 and potentially challenge the year-to-date high of $2,685, with the $2,700 mark as the next target.
Gold has been historically used as a store of value and a medium of exchange, with its current role as a safe-haven asset during turbulent times. Central banks are major gold holders, using the metal to support their currencies and increase trust in their economic strength and stability. Gold has an inverse correlation with the US Dollar and US Treasuries, making it an attractive investment during Dollar depreciation or market uncertainty.
The price of gold can be influenced by various factors, including geopolitical instability, global economic conditions, and currency movements. As a yield-less asset, gold tends to rise in times of lower interest rates and economic uncertainty. The performance of the US Dollar also plays a significant role in determining gold prices, with a strong Dollar keeping prices controlled and a weaker Dollar pushing prices higher.
