Gold (XAU/USD) has regained strength as markets assess weaker US employment data and the interest rate outlook. The latest ADP report showed slower private-sector job growth than expected. This reduced expectations for a Federal Reserve rate hike and provided support for the precious metal. Attention now turns to the US Nonfarm Payrolls report for further signals on the labor market and Federal Reserve policy.
Gold regains momentum as weak ADP data weighs on rate hike expectations
Gold has regained strength after falling below $4,300 earlier in the week. The latest ADP Employment Change report provided further support for the precious metal. US private employment increased by only 38,000 jobs in August. Markets had expected an increase of 48,000. The previous month’s figure was revised to 46,000. The weaker report raised questions about the strength of the US labor market and increased attention on the Federal Reserve outlook.
Markets slightly reduced expectations for a Federal Reserve interest rate hike in September after the ADP report. The estimated probability declined to around 62% from about 66% before the data. Developments in Japan have added further pressure on the US currency. Markets have increased expectations that the Bank of Japan could raise interest rates this month. Concerns about possible intervention by Japanese authorities have also supported the Japanese Yen. These developments have weighed on USD/JPY and created additional support for gold.
Attention now shifts toward Friday’s US Nonfarm Payrolls report. Markets expect payrolls to increase by 55,000 in August after a decline of 23,000 in July. The unemployment rate is expected to remain at 4.1%. A weaker employment report could increase pressure on the US currency and support gold. Stronger data could instead revive rate concerns and weigh on the metal.
Gold Technical Analysis: Rising Support Trendline Remains Intact
The gold chart below shows price holding above a major rising support trendline that has guided the advance for several years. The trendline has repeatedly supported price during important declines. Gold recently tested this rising support and remained above it. This reaction keeps the rising trendline important for the current price structure.
The overall structure remains constructive as gold holds above the rising support trendline. Price recently declined toward this trendline after falling from above $5,500. Gold stayed above this support before gaining ground toward the dashed horizontal resistance. Price then declined from this resistance and is now trading between the rising support trendline and the major resistance area.
The rising trendline now remains an important area to watch. Continued strength above this support could allow gold to challenge the resistance near $4,800. A break above this level could open the way for further gains. However, further weakness could increase downside pressure and weaken the current technical structure.
Gold Forecast: Fed Policy and Technical Strength Could Drive the Next Move
Gold remains firm as weak US employment data lowers expectations for a Federal Reserve rate hike. Attention now shifts to the Nonfarm Payrolls report for further direction on interest rates. On the technical side, gold continues to hold above the rising support trendline. This keeps the current structure constructive despite the latest decline from resistance. Continued strength above the trendline could support another test of resistance, while further weakness could increase downside pressure.
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