Gold prices faced a downturn following a robust U.S. jobs report, which has diminished pressure on the Federal Reserve to maintain higher interest rates. As of now, gold is trading at $2,643, reflecting a decline of 0.40%.
According to the U.S. Bureau of Labor Statistics (BLS), the labor market shows signs of strength, with September’s job numbers significantly surpassing expectations. This positive data alleviates some of the Fed‘s concerns about meeting its maximum employment goals after it reduced borrowing costs by 50 basis points during its September meeting.
The report indicated a drop in the unemployment rate, which fell two-tenths to 4.1%. Average hourly earnings presented mixed results, with a monthly decrease while showing a year-over-year increase.
In response to the jobs report, the U.S. 10-year Treasury note yield rose by 12 basis points to 3.971%, marking its highest level since mid-August. This uptick in yields has contributed to capping gold prices, along with a strengthening U.S. Dollar Index (DXY), which reached 102.58, its peak since August, up 0.63%.
Market analysts now anticipate a 25-basis-point rate cut by the Fed at its November meeting, with only a small fraction of investors expecting rates to remain unchanged. Upcoming economic data releases, including inflation metrics, jobless claims, and consumer sentiment from the University of Michigan, will be closely monitored.
Austan Goolsbee, President of the Chicago Fed, noted that additional positive employment reports would bolster confidence in achieving full employment. He added that most officials within the Fed foresee significant rate reductions over the next 18 months.
Geopolitical tensions, particularly the conflict involving Hezbollah, Iran, Israel, and the U.S., are expected to support gold prices, potentially pushing them towards the $2,700 mark.
Key Market Movers: Gold Drops Amid Diminished U.S. Recession Fears
In September, U.S. Nonfarm Payrolls increased by 254,000, exceeding the expected 140,000 and the upwardly revised figure of 159,000 for August. The unemployment rate decreased to 4.1%, below projections.
Average hourly earnings rose 0.4% month-over-month, slightly down from 0.5% in August but surpassing the anticipated 0.3%. Year-over-year, hourly earnings climbed by 4%, outpacing earlier estimates and the August figures of 3.8% and 3.9%.
Market participants are largely dismissing the prospect of a 50-basis-point cut by the Fed, with current projections indicating a 95% likelihood of a 25-basis-point cut and only 5% chance of maintaining the status quo, according to the CME FedWatch Tool.
Technical Analysis: Gold Price Trends Below $2,650, Targeting $2,600
Gold has consolidated around the $2,640-$2,670 range for five consecutive days as the Relative Strength Index (RSI) moves out of overbought territory. With buyers losing momentum, a pullback seems likely.
A daily close below $2,650 could lead to a decline towards the support level established at the September 18 high of $2,600. Should this level be breached, the next area of demand is likely to be the 50-day Simple Moving Average (SMA) at $2,524.
For a bullish outlook, gold needs to surpass the $2,670 mark, which would set the stage for a challenge of the year-to-date high of $2,685, followed by the critical $2,700 threshold.
Related topics:
Markets Rally as Investors Embrace Easy Money Policies
Gold Market Retreats Amid Positive Durable Goods Data
KINGHOOD Launches Smart Gold Store for Global Gold Transactions
