- Following the ISM and ADP reports, a rise in gold from a low of $3,343 highlighted a slowdown in the US economy.
- Trump issued an executive order raising metal tariffs to 50%, intensifying trade tensions with China.
- Federal Reserve officials are being cautious. The market is looking for unemployment claims and NFP data for further guidance on policy.
Gold prices increased by over 0.80% on Wednesday during North American trading. The release of weaker-than-expected economic data from the US led to this. Business activity appears to be diminishing, and fewer individuals are entering the workforce. Gold is trading at $3,382 after dipping to a daily low of $3,343.
Heightened tensions between the US and China have pushed gold prices up. The uncertainty surrounding the trade discussions between the White House and China, coupled with lackluster economic data, has contributed to this shift.
Meanwhile, President Donald Trump signed an executive order effective June 4, raising tariffs on iron and aluminum from 25% to 50%, just before a scheduled call with Chinese President Xi Jinping this week.
US economic data suggests a cooling trend, reinforcing the need for action from the Federal Reserve. The Institute for Supply Management (ISM) recently reported the first contraction in business activity in the services sector in nearly a year. Moreover, the ADP National Employment Change Data indicated a notable slowdown in private sector job growth in May.
In reaction to the data release, Trump expressed frustration with Fed Chairman Jerome Powell, suggesting it’s too late for lowering borrowing costs. Throughout the week, Fed officials have reiterated their patience regarding the ongoing mitigation cycle initiated last year, commenting on the uncertain impact of tariffs and the potential for sustained price increases.
Earlier this week, traders were focused on the weekly unemployment claims ending May 31, and they’ll be watching for non-farm payroll numbers on Friday.
Gold Daily Market Movement: XAU/USD rises as US Treasury yields fall and impact the dollar
- Gold prices are climbing as the US dollar weakens. The US Dollar Index (DXY), which measures the dollar against a basket of six currencies, dropped 0.44% to 98.81.
- US Treasury bond yields are decreasing. The yield on the 10-year Treasury fell to 4.383%, down 7.5 basis points. Corresponding US yields are also lagging, dropping to 2.063%, which supports higher bullion prices.
- In May, the ADP National Employment change showed an increase of 37K, falling short of the 110K estimate and significantly below the previous month’s revised figure of 60K.
- ISM Services PMI dropped from 51.6 in April to 49.9 in May, down from previous estimates of 52.0.
- According to Prime Market terminal data, traders anticipate 54 basis points towards the end of the year.
XAU/USD Technical Outlook: Gold remains optimistic, but buyers are hesitant below $3,400
Technically, gold prices show an upward trend, although they struggled to surpass this week’s peak of $3,392 during the session. The relative strength index (RSI) suggests that buyers are currently in control.
If XAU/USD climbs above $3,400, it will open the way to test significant resistance levels. The first peak to look for is $3,438 from May 7, followed by $3,450, and a potential all-time high of $3,500.
If gold dips below $3,300, sellers could push XAU/USD down to a 50-day simple moving average of $3,235, with further support at $3,167 established on April 3.
