Gold prices saw a pause in their recent advance on Thursday as U.S. Treasury bond yields recovered and the U.S. dollar held minimal gains. Traders appeared to be booking profits ahead of the upcoming U.S. Nonfarm Payrolls report, which is expected to create volatility in financial markets. The price of gold (XAU/USD) was down 0.38%, trading at $2,852.
With no clear market catalyst, sentiment shifted negatively, as U.S. equity indices declined. Despite this, gold, a non-yielding asset, continued to trim some of its weekly gains, with increased concerns surrounding the ongoing trade war between China and the U.S.
U.S. job data for the week ending February 1 showed a rise in the number of people applying for unemployment benefits, according to the U.S. Department of Labor. However, the report was largely overlooked due to distortions caused by wildfires in Los Angeles and adverse weather conditions in other parts of the country, as reported by Bloomberg.
Bullion failed to gain momentum following dovish comments from Chicago Federal Reserve President Austan Goolsbee. While Goolsbee indicated that the Fed is in a strong position for potential rate cuts, he stressed that uncertainty surrounding Washington’s policies would require a “slower approach.”
Market Movers: U.S. Treasury Yields and Dollar Impact Gold Prices
The U.S. Dollar Index (DXY), which measures the performance of the dollar against a basket of six major currencies, registered a slight increase of 0.06%, reaching 107.68. The U.S. 10-year Treasury bond yield rose by 1.5 basis points to 4.44%, while U.S. real yields, which tend to move inversely with gold prices, also climbed 1.5 basis points from 2.01% to 2.0026%, providing some support for the dollar and weighing on gold.
For the week ending February 1, U.S. Initial Jobless Claims rose to 219,000, surpassing expectations of 213,000 and marking an increase from the previous week’s 208,000. This uptick suggests that more Americans are filing for unemployment benefits than anticipated.
The U.S. Nonfarm Payrolls report for January is expected to show a decline, with an estimate of 170,000 jobs added, down from 256,000 in December. The unemployment rate is projected to remain steady at 4.1%. Money market futures indicate that there is a 47.5 basis point expectation for easing by the Federal Reserve in 2025.
XAU/USD Technical Outlook: Gold Prices Dip Below $2,860
Gold prices dipped below $2,860, but the XAU/USD pair remains on track to challenge its year-to-date high of $2,882, with potential resistance levels at $2,890 and $2,900. Despite the drop, the Relative Strength Index (RSI) remains in overbought territory, though it has not yet reached extreme levels above 80, which could set the stage for a mean-reversion trade.
Gold prices fell to a low of $2,834 but rebounded above $2,850, signaling potential for further upside. However, if gold prices fall below $2,800, immediate support would be at the January 27 swing low of $2,730, followed by $2,700.
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