- Gold takes a breather after reaching an impressive $3,578.50, leading to profit-taking and a stable USD influencing market sentiment.
- This easing also contributes to lower US Treasury yields, bringing some calm to the global bond market.
- Traders are eyeing the upcoming ADP employment reports as a key indicator ahead of the Non-Farm Payrolls (NFP), which might reignite gold’s bullish momentum if the data is softer than expected.
On Thursday, gold (XAU/USD) experienced a pullback after hitting a fresh record high of $3,578.50 the previous day, interrupting an impressive seven-day rally. Currently, it’s trading around $3,540 in the European session, having dipped to $3,510 earlier as profit-taking alongside a steady US dollar shapes market emotions. This shift alleviates some of the frantic demand for safe-haven assets that have propelled gold’s records, as the global bond market starts to settle following recent volatility.
The broader bullish trend for gold persists, bolstered by strong expectations that the Federal Reserve might reduce interest rates at its upcoming Monetary Policy Conference on September 16-17. Lower borrowing costs tend to minimize the opportunity cost of holding non-yielding assets like gold, while a weaker US dollar supports demand. In addition, lingering concerns about tenuous bond markets, ongoing global trade tensions, and financial reliability in major economies—coupled with the Fed’s independence—continue to drive safe-haven demand.
Focus is shifting to the US labor market, with the ADP Employment Change Report for August taking priority ahead of Friday’s NFP data release. Other economic indicators, including weekly unemployment claims and second-quarter productivity, along with ISM Services PMI updates, are also scheduled for later today. These releases are expected to provide fresh insights into the labor market and the services sector, potentially shaping expectations for the Fed’s September meeting and influencing gold’s direction in the near term.
Market Movers: DXY remains steady, bond markets steady, Trump’s tariffs face legal challenges
- The US Dollar Index (DXY), reflecting the greenback’s value against a basket of six major currencies, is holding above 98.00 after recovering some losses from Wednesday. The index is still trading within a narrow range established since early August as traders await upcoming US economic data.
- A decline in US Treasury yields has helped limit gold’s downside, with the 10-year yield decreasing by about 2 basis points to 4.19% and the 30-year yield dropping nearly 3 basis points to 4.87%. Softer yields provide some cushion for gold, which is experiencing a mild correction on Thursday.
- After a recent surge pushed long-term yields in Japan and the UK to significant monthly highs, global bond markets show signs of stabilization. A successful debt auction in Tokyo and reassurance from UK policymakers have eased investor concerns, although fundamental financial issues persist. Rising borrowing costs among major economies continue to raise worries about debt sustainability, prompting investors to hedge against policy risks and credit pressures.
- On Wednesday, the Trump administration petitioned the U.S. Supreme Court to overturn a ruling from a federal appeals court that challenged the president’s global tariffs. The lower court noted that the International Emergency Economic Powers Act (IEEPA) does not provide the president with unlimited tariff authority amid the “major issues” doctrine. The Justice Department is aiming for a review by September 10, with several lawsuits pending for a hearing in November. The tariffs remain in effect until the court rules, placing Trump’s broader economic agenda under scrutiny.
- Job openings in the US decreased to 7.18 million in July, marking the lowest figure in 10 months, indicating a softening demand for labor. This drop raises concerns about employment risks and supports the case for a potential 25-basis point reduction by the Fed in September. The market probabilities for a rate cut based on the CME FedWatch tool are currently close to 97%.
- Additionally, the Federal Reserve’s Beige Book for September highlights downside risks to the inflation outlook, suggesting that the central bank may maintain a cautious approach in policy decisions. Reports indicate that many districts expect continued price increases in the coming months, with three districts anticipating further rises.
- On Wednesday, Federal Reserve officials adjusted their tone. Governor Christopher Waller suggested starting the rate reduction at the next meeting, indicating that multiple cuts could follow within six months. Atlanta Fed President Rafael Bostic indicated that a 25-basis point order could be on the table this year, acknowledging ongoing inflation risks. Meanwhile, St. Louis Fed President Alberto Musalem mentioned that the current policy stance is appropriate, but warned that ongoing labor market cooling might necessitate changes if the trend persists.
Technical Analysis: XAU/USD trends, RSI indicates support around $3,500
XAU/USD is currently consolidating after establishing new record highs on Wednesday. Momentum indicators appear to be softening. The relative strength index (RSI) shows values above 70, suggesting a potential pause or retracement. The mean directional index (ADX) is above 25, indicating that the bullish trend remains strong, although it may be a bit stretched.
The recent rally has pushed gold prices to the upper limits of the Bollinger Bands, with spot prices hovering near $3,543. This indicates robust bullish momentum, but it also comes with warnings of potential overextension. A correction back to the mid-band, which coincides with a 20-day moving average around $3,398, is a possibility if profit-taking deepens.
On the downside, immediate support is at the daily low of $3,511, with the crucial psychological level resting at $3,500. A deeper correction would eye the $3,450 area, which previously acted as resistance and has now become a strong support level. Meanwhile, the recent record high of $3,578 stands as a significant resistance point, and a sustained breakthrough could lead to targeting the $3,600 mark.
