The gold price is struggling to capitalize on the modest overnight gains from the vicinity of the $1,900 level or weekly lows and remains on the defensive through the early Asian session on Friday. XAU/USD is currently trading around the $1910 region, virtually unchanged on the day and seemingly vulnerable to an extended two-month-old downtrend from all-time highs touched in May.
Expectations of a hawkish Fed stance act as a headwind for gold price Expectations firmly that the Federal Reserve will raise interest rates again, adding 25 basis points (bps) at the upcoming policy meeting on July 25-26, continue to act as a headwind for non-yielding gold. Bets were reaffirmed after the data released by Automatic Data Processing (ADP) on Thursday showed that private-sector employers in the US added nearly 500K jobs in June. The data marked the largest one-month gain since February 2022 and smashed estimates for an increase of 228K by a large margin. Separately, the Institute for Supply Management’s (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) (also known as ISM Services PMI) rose from 50.3 to 53.9 in June, above the expected reading of 51.
This, to a larger extent, has overshadowed the data that showed Weekly Initial Jobless Claims came in higher than expected last week and JOLTS Job Openings for May missed consensus estimates. In fact, the US Department of Labor (DOL) reported that there were 248,000 initial jobless claims in the week ending July 1 compared to the previous week’s figure of 236,000 (revised from 239,000) and slightly above market expectations of 245,000. Furthermore, data from the US Bureau of Labor Statistics (BLS) on Job Openings and Labor Turnover Survey (JOLTS) showed job openings in the last business day of May at 9.8 million versus the forecasted 9.93 million and 10.3 million job openings in April (revised from 10.1 million).
Rising US bond yields support USD and also weaken XAU/USD However, the data points to a resilient US economy and supports prospects of the Fed tightening its policy further. In turn, this would push US Treasury bond yields higher and act as a headwind for the US Dollar (USD), which is seen as another factor impacting the price of gold priced in USD. Nonetheless, the downside has been somewhat mitigated as traders appear to have shifted to the sidelines ahead of the release of the US monthly jobs report. The widely-known Nonfarm Payrolls (NFP) report, which will be released later in the North American trading session, could influence expectations regarding the Fed’s rate hike trajectory. As a result, this could drive USD demand and provide new momentum for XAU/USD.
TRADING RECOMMENDATIONS:
BEFORE NONFARM:
SELL around the price range of 1912-1915.
Stop Loss: 1920.
Take Profit 1: 1906.
Take Profit 2: 1903.
Take Profit 3: 1895.
BUY around the price range of 1900-1903.
Stop Loss: 1896.
Take Profit 1: 1909.
Take Profit 2: 1914.
Take Profit 3: 1922.
AFTER NONFARM:
BUY around the price range of 1892-1893.
Stop Loss: 1888.
Take Profit 1: 1899.
Take Profit 2: 1903.
Take Profit 3: 1911.
SELL around the price range of 1936-1940.
Stop Loss: 1945.
Take Profit 1: 1930.
Take Profit 2: 1925.
Take Profit 3: 1920.
Note: Trade with 1% of your account balance per trade. Do not risk more than 5% of your account capital within the nearest 10 price levels. Always set stop-loss (SL) and take-profit (TP) to protect profits and capital. Be mindful of your current capital allocation when entering trades.
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