Gold prices surged to a six-week high, reaching $2,385 as traders reacted to the latest US labor market data. Although the June Nonfarm Payrolls (NFP) report exceeded expectations, downward revisions to the figures from April and May hinted at a faster cooling of the labor market than previously thought. This led to speculation that the Federal Reserve (Fed) may cut rates in September, putting pressure on the US Dollar and boosting the appeal of gold.
The XAU/USD pair traded at $2,391, posting gains of over 1.40% for the day and more than 2.70% for the week. This upward momentum was supported by a weaker US Dollar, which was weighed down by lower US Treasury bond yields. The US Dollar Index (DX) fell by 0.16% to 104.95, while the 10-year Treasury yield dropped more than six basis points to 4.284%.
In addition to the labor market data, geopolitical tensions also played a role in driving up the price of gold. Israeli Prime Minister Benjamin Netanyahu sent a delegation to continue negotiations on hostages, while a Hamas leader indicated readiness to start talks with Israel. These developments added to the uncertainty in the market, further supporting the demand for safe-haven assets like gold.
Looking ahead, technical analysis suggests that the gold price has broken a key resistance level and is now aiming for the $2,400 mark. A bullish Relative Strength Index (RSI) indicates that buyers are in control, with a potential trading range between $2,370 and $2,400. If the price surpasses $2,400, it could target higher levels such as $2,450 and $2,500. On the other hand, a drop below $2,350 could lead to further declines towards $2,300 and $2,277.
Gold has historically been viewed as a safe-haven asset and a hedge against inflation and currency depreciation. Central banks, especially those from emerging economies, have been increasing their gold reserves to strengthen their currencies and improve economic stability. The precious metal is also inversely correlated with the US Dollar and US Treasuries, making it an attractive option for investors seeking diversification.
Overall, the recent surge in gold prices reflects a combination of factors, including the latest US labor market data, geopolitical tensions, and technical indicators. As investors continue to monitor developments in the global economy and financial markets, gold is likely to remain a key asset for hedging against uncertainty and volatility.