Market Overview
Gold prices experienced a decline of 0.80% on Thursday, falling to $3,332 from a previous high of $3,365. This decrease was primarily driven by a robust US Nonfarm Payrolls report, which bolstered the US Dollar and diminished expectations for a Federal Reserve rate cut in July.
US Employment Report
The employment report for June exceeded market expectations, with the US economy adding 147,000 jobs and the unemployment rate dropping to 4.1%. This data indicates a strong labor market, contrasting sharply with the previous day's ADP report that showed a decrease of 33,000 in private sector hiring. As a result, the US Dollar strengthened, supported by rising US Treasury yields.
Federal Reserve's Stance
The Federal Reserve has reiterated its commitment to maintaining current interest rates until there is clear evidence of a weakening labor market or a return to deflation. This position is reinforced by the latest employment data.
Trade Agreements and Fiscal Policy
US Treasury Secretary Scott Bessent announced that additional trade agreements are expected following the recent Vietnam accord. He emphasized that the Federal Reserve is responsible for setting interest rates and mentioned that the administration would begin the process of identifying a successor to Jerome Powell in the autumn.
Additionally, the US House of Representatives has advanced Donald Trump’s “One Big Beautiful Bill” for a final vote, which is projected to increase the national debt by $3.3 trillion over the next decade.
Gold Market Dynamics
Gold prices are under pressure as US Treasury yields and the US Dollar continue to strengthen. The labor market's resilience is further supported by a decrease in initial jobless claims and an increase in the ISM Services PMI, indicating growth in the services sector. The Atlanta Fed President, Raphael Bostic, advocates for a cautious monetary policy approach due to economic uncertainties and potential inflation from tariffs.
In May, central banks, including those from Kazakhstan, Turkey, and Poland, added 20 tonnes of gold to their reserves. Money markets are currently pricing in 50 basis points of easing by the end of the year.
Technical Outlook for XAU/USD
Gold is currently consolidating below the $3,400 mark due to hesitancy among buyers, despite an overall uptrend. For XAU/USD to challenge the record high of $3,500, it must surpass the June 16 high of $3,452. Conversely, a drop below $3,300 could target the June 30 low of $3,246.