Weak non-farm payroll data injects newconfidence into gold bullsGold rebounded strongly late last week, shaking off early-week losses and surging toward key resistance at $3,400 per ounce as weak US jobs data rekindled hopes for a September rate cut by the Federal Reserve.
Spot gold closed at $3,363.16 on Friday (August 1st), up 2.23% on the day, or $73.24, after hitting a high of $3,363.37.
Lukman Otunuga, senior market strategist at FXTM, said Friday's rally in gold prices was impressive, driven by a plunging US dollar.
"From the chart, bulls were on a rampage that day, with $3,400 within 2% of the price at that point," he said. "With prices breaking through $3,330 resistance, the weekly chart is significantly bullish. A weekly close above this level could signal a move toward $3,400."
Last week, gold faced significant selling pressure after the Federal Reserve held interest rates steady and Chairman Powell raised uncertainty about a possible September rate cut.
"We haven't made a decision about September yet," Powell said at a press conference following the Fed's decision.
After disappointing U.S. job market data, lingering doubts about a September rate cut dissipated. According to the Bureau of Labor Statistics, the U.S. economy created only 73,000 jobs last month. Furthermore, total job growth in May and June was revised downward by 258,000. According to the revised data, only 14,000 jobs were created in June and 19,000 in May.
"This weaker-than-expected jobs report has dented confidence in the U.S. economy and put pressure on the dollar as markets anticipate a more dovish Fed, potentially leaning toward rate cuts to stimulate growth," said Aaron Hill, senior market analyst at FP Markets. "For gold, the disappointing jobs data reinforces its role as a hedge against economic uncertainty, supporting prices as investors seek stability."
According to the CME FedWatch tool, the market currently sees a 92% probability of the Fed easing monetary policy in September. Last Thursday, the market saw only a 38% chance of a rate cut.
Jamie Cox, managing partner at Harris Financial Group, said the Federal Reserve may ultimately regret its decision to hold interest rates steady earlier this week.
"A rate cut in September is a definite possibility, perhaps even a 50 basis point cut, to make up for lost time," he said.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said he sees the potential for gold prices to steadily rise to $3,400 an ounce given the sharp shift in interest rate expectations.
"If the Fed signals a dovish stance, speculative inflows could push gold prices above the psychological $3,400 level, especially as investors seek safe havens during economic uncertainty," he said. "Technical indicators, such as a bullish trend in gold ETFs and rising open interest, support this potential breakout. We believe traders are already positioning for a dip bounce, with some analysts pointing to seasonal patterns in gold that typically gain traction after August. While volatility may still limit near-term gains, the overall trend looks positive, and the typical summer lull may be over."
This week will be light on economic data, with investors continuing to digest Friday's jobs report. Meanwhile, some analysts expect the economic uncertainty stemming from President Trump's ongoing trade war and global tariffs to further boost safe-haven demand for gold.
Trade tensions are providing another layer of support for gold. President Trump set an August 1st deadline for countries to finalize a trade deal. While the United States reached agreements with Japan and the European Union, resulting in a 15% increase in import tariffs, many major trading partners still face the risk of tariff increases.
As a result, exports from many countries now face significant cost increases. Specifically, Canada, the United States' second-largest trading partner, faces a 35% tariff increase. Meanwhile, India faces a 25% increase, Taiwanese exports will be subject to a 20% tariff, South African products face a 30% tariff, and Swiss goods face a 39% tariff.
Pepperstone market strategist Michael Brown said he remains bullish on gold, citing global trade uncertainty as a key factor driving its value as a monetary asset.
He said: "The diversification of reserves away from the US dollar and into gold, particularly in emerging markets, will continue for the foreseeable future. Of course, potential safe-haven demand stemming from concerns about the state of the US economy will further support the bullish view. The upside levels to watch remain the $3,400 mark, followed by a high of around $3,445, and then a potential run towards the all-time high of $3,500. I certainly wouldn't rule out the possibility of new highs in gold prices before the end of the year."
Chris Vecchio, Head of Futures Strategy and FX at Tastylive, said he sees gold as a very beneficial global currency.
"Tariffs mean that countries will trade less in US dollars, so I expect gold to continue to perform well as the world searches for an alternative monetary asset."
