Gold climbs as weak US NFP sends the US Dollar to a two-week low

Gold (XAU/USD) trades on the front foot on Thursday as the US Dollar (USD) weakens amid rumors of a potential intervention by Tokyo after the Japanese Yen (JPY) hit a 40-year low earlier this week. The Greenback extended its losses following a weaker-than-expected US Nonfarm Payrolls (NFP) report.

At the time of writing, XAU/USD trades around $4,120, up nearly 2.20% on the day. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 100.75, hitting a two-week low.

Data released by the US Bureau of Labor Statistics (BLS) showed the US economy added 57K jobs in June, well below market expectations of 110K. Meanwhile, May's payrolls were revised lower to 129K from the previously reported 172K.

Meanwhile, the Unemployment Rate unexpectedly edged lower to 4.2% from 4.3% in May. Average Hourly Earnings rose 0.3% MoM and 3.5% YoY in June, matching market expectations.

The weak NFP print helped cool expectations of a more hawkish Federal Reserve (Fed), pushing Gold above its one-week trading range to trade above the $4,100 mark. According to the CME FedWatch Tool, the probability of a rate increase in September fell to 51% from 63% before the data release.

Still, monetary policy is expected to remain restrictive for longer after Fed Chair Kevin Warsh reiterated his commitment to restoring inflation to its 2% target at the European Central Bank (ECB) Forum on Wednesday. "We are in the price stability business," he said, even as he acknowledged that "inflation risks have come down."

San Francisco Fed President Mary Daly said on Thursday, "It's possible we may have to fight more persistent inflation," while adding, "Can't decide right now, can't give false guidance on rates."

Against this backdrop, Gold may struggle to stage a meaningful recovery as traders continue to anticipate that the Fed could raise interest rates later this year.

However, inflation concerns have eased in recent weeks following the sharp decline in Oil prices after the United States and Iran signed a 60-day Memorandum of Understanding (MoU) last month that partially reopened the Strait of Hormuz.

West Texas Intermediate (WTI) crude trades around $67 per barrel, its lowest level since February, retreating from a peak of $113 during the US-Iran war.

In the recent developments, indirect talks between the two sides concluded in Doha, with Qatari mediators reporting "positive progress," although no significant breakthrough was announced.

Technical analysis: Bulls look to reclaim $4,100

XAU/USD keeps a bearish near-term bias as price holds well below the 200-day Simple Moving Average (SMA) and the 100-day SMA.

The metal is hovering just above the $4,100 level. A decisive break above it would ease the near-term bearish pressure. The Relative Strength Index (RSI) on the daily chart is at 42, below the neutral 50 mark and hinting at lingering downside momentum, while the Average Directional Index (ADX) is near 41, signaling a relatively strong prevailing trend.

On the topside, initial resistance appears at $4,100, followed by a stronger barrier at $4,300 before the longer-term cap from the 200-day SMA at $4,483 and the 100-day SMA at $4,643.

On the downside, immediate support is seen at $3,950, with a deeper bearish extension exposing the next key floor at $3,800, where buyers would be expected to show more interest if the current slide continues.

(The technical analysis of this story was written with the help of an AI tool.)