Gold surges more than 2.5% as weak US jobs data and lower Oil prices pressure the US Dollar.
Markets scale back September Fed rate-hike expectations ahead of Friday's NFP report.
XAU/USD retests the 50-day SMA after reclaiming the 21-day SMA.
Gold (XAU/USD) jumps more than 2.50% on Wednesday as weaker-than-expected US labour market data and lower Oil prices on hopes of reopening the Strait of Hormuz weigh on the US Dollar (USD) and weaken expectations for Federal Reserve (Fed) rate hikes. At the time of writing, XAU/USD trades around $4,185, after briefly climbing above $4,200, its highest level in over a month.
ADP Employment Change rose by 44K in July, missing expectations of 70K and slowing from 98K in June. The report follows Tuesday’s softer-than-expected JOLTS Job Openings data. Traders now look ahead to Friday’s Nonfarm Payrolls (NFP) report for further clues about the US labour market.
Strategists at ING note that “lower energy prices have eased some inflation concerns, offering a more supportive backdrop for bullion,” even as investors continue to weigh the policy outlook. They point out that “markets continue to assess the outlook for US monetary policy following last week's Federal Reserve meeting,” leaving Gold “caught between improving geopolitical sentiment and ongoing uncertainty over US interest rates.”
Expectations of a September Fed rate hike have weakened, with the CME FedWatch Tool showing the probability falling to 56.9% from 67.2% a day earlier.
Despite fading rate-hike bets, the US central bank is expected to maintain a restrictive policy stance until inflation is clearly moving back toward its 2% target. This suggests that interest rates could stay higher for longer, which may prevent Gold from staging a stronger recovery.
On the geopolitical front, US President Donald Trump said Washington had "very good discussions" with Iran during day-long negotiations on Tuesday. Trump added that the Strait "is going to be open very soon."
Axios reported that the United States, Iran and Oman are nearing an interim deal that could be announced as early as Wednesday. The proposed deal would establish a temporary 60-day arrangement between Iran and Oman to restore shipping.
Technical analysis: Buyers challenge the 50-day SMA
On the daily chart, XAU/USD has pushed back above the 21-day Simple Moving Average (SMA) at $4,064, hinting at a constructive near-term tone, and holds slightly above the 50-day SMA at $4,160, keeping the broader stance neutral rather than outright bullish.
Momentum is improving, with the Relative Strength Index (RSI) around 57 and the Moving Average Convergence Divergence (MACD) in positive territory, suggesting buyers are attempting to regain control while still facing near-term trend resistance.
On the topside, immediate resistance is located at the 50-day SMA at $4,160, followed by the horizontal barrier at $4,200. A daily close above this zone would open the way toward the 100-day SMA near $4,398. On the downside, initial support is provided by the 21-day SMA at $4,064, ahead of the psychological and chart floor at $4,000, where a break lower would signal a deeper corrective phase.
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