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• Gold rebounded around 0.69% on Friday despite significant US job additions, challenging Fed's rate cut path.
• Gold recovered from the post-labor report drop as investors weighed the Fed's cautious disinflation stance.
• Upcoming US inflation and retail sales data will likely influence Fed policy and gold's trajectory.

The price of gold rebounded off of the daily lows on Friday, as the yellow metal extended its rally for the fourth consecutive day while traders shrugged off the strong United States Nonfarm Payrolls report. This tempered the Federal Reserve’s concerns about the labor market, but not so much inflation, as some officials acknowledged. The XAU/USD currency cross was recently seen at around $2,687, up approximately 0.69%.

Bullion fell sharply after the US Bureau of Labor Statistics (BLS) revealed that the economy added an outstanding number of people to the workforce, topping 200,000. As a consequence, the Unemployment Rate dipped, while investors priced in fewer interest rate cuts based on the fact that the economy continues to create enough jobs, while the disinflation process “halted,” according to the Fed’s latest minutes.

Nevertheless, the XAU/USD cross recovered once market participants digested the data. The data reassured Fed officials that the labor market remains healthy while they tackle inflation, which recently edged higher after the US central bank lowered rates by 100 basis points in 2024.

The US dollar rose sharply to multi-month highs according to the US Dollar Index (DXY). The DXY hit the 109.96 mark before trimming gains at the 109.68 level, up 0.49%. US Treasury bond yields soared before they stabilized at the belly of the curve.

Chicago Fed President Austan Goolsbee said they don’t complain because the economy has created over 250,000 jobs. He added that the jobs market seems stable “at full employment,” adding that if conditions are stable and there’s no rise in inflation, “rates should go down.”

Given this backdrop, investor focus will shift to next week’s data. The US schedule will feature inflation figures on the producer and consumer side, alongside Retail Sales and jobless claims for the week ending Jan. 11.

Market Movers: Gold Price Surged, Accompanied by the US Dollar

• The price of gold shrugged off higher US real yields, which rose by two bps to 2.30%. At the same time, the US 10-year T-note yield soared seven and a half bps to 4.767%.
• The US Bureau of Labor Statistics revealed that the economy created 256,000 jobs last month, although November was revised downward from 227,000 to 212,000. The consensus projected 160,000 people to be added to the workforce, with private hiring totaling 223,000.
• The Unemployment Rate fell to 4.1%, while Average Hourly Earnings (AHE) dipped from 4% to 3.9%. Following the data release, traders expect the Federal Reserve to cut rates just once in 2025.
• Easing expectations of the Federal Reserve continued to edge lower. The December Fed funds futures contract appeared to be pricing in 30 basis points of easing.
• US Consumer Sentiment in January announced by the University of Michigan (UoM) missed estimates of 73.8 and was down to 73.2. Inflation expectations for one year rose by 3.3%, up from 2.8%, and inflation expectations for a five-year period increased from 3% to 3.3%.
• On Thursday, Fed Governor Michelle Bowman maintained a hawkish stance, saying the central bank should be cautious in adjusting interest rates, while Kansas City Fed Jeffrey Schmid added that rates are “near” neutral.
• Recently, Philadelphia Fed Patrick Harker revealed that the US central bank could pause amid uncertainty, while Boston Fed Susan Collins said the current outlook suggests a gradual approach to rate cuts.

XAU/USD Technical Outlook: Gold Price Soared Above $2,650 as Bulls Stepped In

Gold’s uptrend has remained in place as the yellow metal has carved a successive series of higher highs and higher lows, as traders eyed the $2,700 mark. Momentum has been strongly tilted to the upside, as seen on the Relative Strength Index (RSI) indicator, which illustrated bulls as in charge.

If the XAU/USD cross can clear the $2,700 level, the next resistance would be the Dec. 12 high of $2,726 and the all-time high at $2,790.

Conversely, a drop below $2,650 would challenge the 50- and 100-day Simple Moving Averages (SMAs) at $2,645 and $2,632, respectively. On further weakness, the $2,600 mark would be up next, ahead of the 200-day SMA at the $2,503 level.

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