Gold (XAU/USD) is extending its steady decline, falling further into the European session on Friday and hitting a fresh daily low around the $4,030-$4,029 range within the last hour. Traders have significantly reduced their expectations for another interest rate cut by the US Federal Reserve (Fed) in December. This shift occurred after the delayed release of the September US Nonfarm Payrolls (NFP) report on Thursday. This development has been a primary driver behind the recent rally of the US Dollar (USD) to its highest level since late May, and it is seen as a key factor diverting investment away from the non-yielding yellow metal.
However, concerns about weakening economic momentum, stemming from the longest-ever US government shutdown, are preventing USD bulls from making aggressive new bets. Furthermore, ongoing geopolitical uncertainties, particularly the prolonged Russia-Ukraine war, are negatively impacting investor sentiment. This is evident in the generally weaker performance across equity markets, which, in turn, could offer some support to safe-haven Gold. Consequently, caution is advised for XAU/USD bears before positioning for any significant depreciating moves in the near term.
Daily Digest Market Movers: Gold Under Pressure as December Fed Rate Cut Bets Diminish
The US Bureau of Labor Statistics released its closely watched Nonfarm Payrolls report on Thursday, indicating that the economy added 119,000 new jobs in September. This figure followed an August decrease of 4,000 (revised from an initial +22,000) and considerably surpassed market expectations of 50,000. Further details from the report showed that annual wage inflation, as measured by the change in Average Hourly Earnings, remained stable at 3.8% year-on-year, against estimates of 3.7%. This helped to counterbalance an uptick in the Unemployment Rate from 4.3% to 4.4% and affirmed less dovish Federal Reserve expectations. This data follows the less dovish October FOMC minutes released on Wednesday, which revealed that committee members remained divided on the path forward for monetary policy. According to CME Group’s FedWatch Tool, the probability of another interest rate cut by the US Federal Reserve in December has now fallen to approximately 35%. This has been a significant catalyst for the US Dollar’s recent ascent to its highest level since late May and continues to act as a headwind for non-yielding Gold during Friday’s Asian session. Nevertheless, fragile global risk sentiment could help to mitigate downside risks for the safe-haven precious metal. Traders are now awaiting the release of flash US PMIs and the revised University of Michigan Consumer Sentiment Index. Additionally, speeches by influential FOMC members will be closely scrutinized for further clues regarding the rate-cut trajectory, which should provide fresh impetus to both the USD and the XAU/USD pair. Ukrainian President Volodymyr Zelenskyy has stated that he will engage in negotiations with President Donald Trump regarding the US-backed 28-point peace plan, which calls for Ukraine to make difficult concessions to end the Russian invasion. This keeps geopolitical risks in play and could further support the commodity. Gold is approaching confluence support around $4,020 amidst a mixed technical outlook.
The precious metal is currently trading above an ascending trend-line that has been in place for nearly a month, with this support level now located around the $4,020 mark. This area also converges with the 200-period Exponential Moving Average (EMA), making it a crucial pivotal point. A decisive breach below this level could leave the Gold price susceptible to further declines, potentially falling below the psychological $4,000 threshold and accelerating its descent towards the $3,931 support. This downward trend could then extend, possibly retesting the late October swing low, which is situated around the $3,886 region.
Conversely, for bullish traders, it would be prudent to await sustained strength and clear acceptance above the $4,100 mark before initiating new positions. A subsequent rally could propel the Gold price towards its next significant resistance level, found in the $4,152-$4,155 range. This upward momentum might then continue, potentially allowing spot prices to reclaim the $4,200 round-figure mark.
