Gold prices weakened on Friday as robust US Nonfarm Payrolls data pointed to a healthy labor market, leading to diminished expectations for a substantial interest rate cut by the Federal Reserve in November. The XAU/USD trading pair slipped into the $2,650 range as traders reacted to the data, and the US Dollar strengthened concurrently.
According to the latest report from the US Bureau of Labor Statistics (BLS), the economy added 254,000 jobs in September, significantly surpassing the revised figure of 159,000 from August and exceeding economists’ predictions of 140,000. The unemployment rate also fell to 4.1%, down from 4.2% in August and below expectations. Additionally, Average Hourly Earnings showed annual growth of 4.0%, up from a revised 3.9% the previous month and exceeding forecasts of 3.8%. On a monthly basis, earnings rose by 0.4%, slightly down from the revised 0.5% in August, but above the expected 0.3%.
These figures suggest that the US labor market is performing better than anticipated, reducing the likelihood of the Federal Reserve implementing a double rate cut of 50 basis points at its upcoming November meeting. This scenario negatively impacts non-interest-bearing assets like gold, as higher interest rates increase the opportunity cost of holding the precious metal.
Safe-Haven Demand May Support Gold Prices
Despite the decline, gold may find some support through safe-haven demand amid escalating geopolitical tensions in the Middle East. An imminent retaliatory strike by Israel against Iran is anticipated following a recent missile attack by Iran, which involved around 200 missiles launched in response to the death of Hassan Nasrallah, the leader of Hezbollah. These tensions could bolster demand for gold as a protective asset.
Moreover, the overall downward trend in global interest rates may help maintain gold’s appeal as a portfolio asset for investors.
Technical Analysis: Gold Consolidates with Bearish Bias
From a technical perspective, gold is currently navigating within a sideways trading range. The recent drop below the 50-period Simple Moving Average (SMA) on the 4-hour chart indicates a bearish tilt in the short-term outlook.
Gold recently pulled back slightly from its support level at $2,638, the low from October 3, along with a critical trendline. A close beneath these support levels could signal a more pronounced bearish trend and increase the likelihood of further declines.
As long as the XAU/USD remains within this trading range, the short-term trend is sideways. Historically, price movements tend to oscillate between established support and resistance levels. A breakout above the upper boundary at $2,673 or below the lower boundary would confirm a new directional bias.
Should prices drop below $2,638, a move toward the swing low of $2,625 (recorded on September 30) is anticipated. A further decline could see gold prices test the significant support level at $2,600, while an upside breakout above $2,673 would enhance the chances of resuming the prior uptrend, potentially reaching the psychological target of $2,700.
In a broader context, gold maintains a long-term uptrend, and the likelihood of resuming upward momentum is expected once the current consolidation phase concludes.
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