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Gold continues to fly as dollar weakens ahead of NFP data

05 Jul,2024
Gold continues to fly as dollar weakens ahead of NFP data

Gold prices rose in European transactions on Friday, keeping recent gains, coinciding with the decline in the dollar before the issuance of the main Nonfarm Payroll, which is expected to provide more signals on the future of federal interest rates.

- The yellow metal so far sticks to its gains this week after a set of weak U.S. economic data has paid expectations that the Federal Reserve begins to cut interest rates by September. 

- The spot price of gold increased by 0.3 % to $2368.10 an ounce, while the gold futures for gold in August increased by 0.3% to $2371.56 an ounce. 

- Gold contracts are on their way to gain about 1.6% this week, about $100 from the ATH level, as it benefited from increasing bets to reduce the interest rate in September. The weak U.S. recruitment and commercial activity data affected the dollar.

- The CME Fedwatch tool showed that traders account for more than 66% of federal reserves and reduced interest rates by 25 basis points in September. 

- Reduce optimism about reducing interest rates to some extent from the strict references from the Federal Reserve Bank, as the bank's meeting minutes in June showed that policymakers are still skeptical of reducing interest rates. 

- Nonfarm Payroll data may provide more accurate signals about the strength of the labor market, which was also a major disagreement point for the Federal Reserve in reducing interest rates. Low interest rates are a positive scenario for gold and other precious metals, as it increases its attractiveness compared to investing in the dollar.

On the other hand, other precious metals appear to be on their way also to make weekly gains. Platinum futures increased by 
0.2% on Friday and increased marginally this week, while silver futures outperformed their counterparts of precious metals this week, making gains exceeding 4%.

Gold's Technical Analysis

From a technical perspective, some follow-through buying beyond the $2,365 area will reaffirm the constructive outlook and allow gold to reclaim the $2,400 mark. The momentum could extend further towards challenging the ATH at $2,450 zone touched in May.

On the flip side, weakness around the $2,338 region, could be seen as a buying opportunity. This is followed by support near the $2,320 area, which if broken decisively could make the Gold price vulnerable to weaken further below the $2,300 mark and test the $2,285 support zone. Failure to defend the said support levels might expose the $2,258 area, and the $2,220 support before the yellow metal eventually drops to the $2,200 physiological level.


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