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• Gold tumbled after it failed to break through resistance at the $2,531 mark. It closed at $2,493 as Fed rate cut speculation intensified.
• The US Nonfarm Payrolls data missed estimates, as improved figures and rising hourly earnings fueled uncertainty over a 25 or 50 bps cut.
• Despite Treasury yields falling on Friday, the US Dollar Index recovered above the 101.00 level, which pressured gold prices further.

Gold retreated after failing to test the all-time high of $2,531 and diving more than 0.80% late in the North American session on Friday. Meanwhile, US economic data placed doubts on a 50 or 25-basis-point interest rate cut by the Federal Reserve at the September meeting. The XAU/USD cross was seen trading at around the $2,493 mark after hitting a high of $2,529.

The US Bureau of Labor Statistics (BLS) revealed that Nonfarm Payrolls (NFP) in August missed their estimate but improved compared to July’s downwardly-revised number. Digging deep into the report, the Unemployment Rate dipped compared to the previous month, while Average Hourly Earnings rose.

According to the data, Fed interest rate probabilities fluctuated sharply. Based on CME FedWatch Tool data, at some point, traders priced in a 50 bps cut, with odds rising as high as 70%. Nevertheless, as the dust settled, market participants estimated that a 25 bps cut was more likely as the chances of it rose by 73%. Meanwhile, for a 50 bps cut, they decreased to 27%.

Fed policymakers crossed the newswire this week. New York Fed President John Williams said that lowering rates soon will help to keep the labor market balanced. Fed Governor Christopher Waller echoed some of his comments at a speech at the University of Notre Dame. He said, “The time has come” to begin easing policy, and he revealed that he was open to any size of easing.

Recently, Chicago Fed President Austan Goolsbee was dovish, saying policymakers have an “overwhelming” consensus to reduce borrowing costs.

Given all these developments, gold prices tumbled despite the fall in US Treasury yields. Lately, the greenback recovered after sliding below the 101.00 mark and gained over 0.15%, as shown by the US Dollar Index (DXY), which was up at 101.22.

In the geopolitical space, US Secretary of State Antony Blinken said, “90% of the Gaza ceasefire agreement is agreed upon, but critical issues remain where there are gaps; Incumbent on both parties to get to yes on remaining issues,” via Reuters.

Market Movers: Gold Price Descended as Traders Ignored Mixed US Jobs Report

• US NFP numbers increased by 142,000 in August, missing the forecast of 160,000. Additionally, July's figures were revised downward from 114,000 to 89,000.
• The Unemployment Rate dipped from 4.3% to 4.2%, while Average Hourly Earnings rose from 3.6% to 3.8% year-over-year in August.
• Data from the Chicago Board of Trade indicated that the Fed is expected to cut at least 104 basis points (bps) this year, up from 103 bps on Thursday, based on the December 2024 fed funds rate futures contract.

Technical Outlook: Gold Price Tumbled Below $2,500 due to US Dollar Strength

Gold prices remained upwardly-biased, but they seemingly shifted negatively over the short-term. After the XAU/USD cross hit a daily peak above $2,520, it reversed its course and formed a “bearish engulfing” candle chart pattern, which opened the door for additional losses.

Momentum turned bearish, as depicted by the Relative Strength Index (RSI). The RSI appeared ready to cross below its neutral level.

If XAU/USD were to drop below the Aug. 22 low at $2,470, such a move would open the door for further downside. The next demand zone would be the confluence of the April 12 high, which turned into support, and the 50-day Simple Moving Average (SMA) between $2,435 and $2,431.

On the other hand, if buyers could lift prices above $2,500 in the coming days, the next resistance would be the year-to-date high at $2,531. If surpassed, the next stop would be the psychological $2,550 level, followed by the $2,600 mark.

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