Gold rose sharply after mixed US labour-market data drove Treasury yields and the dollar lower. XAU/USD gained over 2.30% on the day and more than 7% for the week, trading at $4,340 after touching $4,371, its highest level since 17 June. July Nonfarm Payrolls showed a 23K fall in jobs versus forecasts for an 80K rise, while combined revisions to May and June cut 103K from prior totals; the Unemployment Rate eased from 4.2% to 4.1%. The US 10-year yield slipped two basis points to 4.687%, and the US Dollar Index (DXY) fell 0.42% to 99.54.
Energy-price moves and rate expectations also shifted. WTI was flat near $78 a barrel but down almost 9.9% over the week, as markets assessed prospects for shipping through the Strait of Hormuz. In swaps, the probability of a Fed hike in September dropped to 30% from 58% a day earlier, while odds of no change rose to 70%, according to Prime Terminal. Focus now turns to July CPI, forecast at 3.4% YoY versus 3.5%, with Core CPI seen at 2.5% versus 2.6%, ahead of PPI and implications for Core PCE. Technically, gold has cleared the 50-day SMA at $4,152 and is testing the 100-day SMA at $4,390, with resistance at $4,450 and $4,500; support sits at $4,202, then $4,152, $4,100 and $4,019.
Market Dynamics Following US Jobs Data
We see a massive shift in market dynamics as gold skyrockets past $4,300 following a disappointing US jobs report. With payrolls shrinking by 23,000 and the 10-year Treasury yield dropping to 4.687%, derivative traders should prepare for a sustained bullish trend in precious metals. Historically, when the Federal Reserve faces weak employment metrics, we observe a swift reallocation of capital from interest-bearing assets to safe-haven gold.
We must closely monitor the rate swap markets, where the probability of a September rate hike has suddenly tumbled to just 30%. This rapid shift away from tight monetary policy significantly reduces the opportunity cost of holding non-yielding assets like bullion. Derivative traders should look to exploit this shifting rate sentiment by positioning for further downside in the US Dollar Index, which has already slipped to 99.54.
Inflation Outlook, Energy, and Trading Strategies
In the coming weeks, we need to focus on the upcoming US CPI and PPI releases, which are expected to show inflation easing to 3.4%. Data from previous market cycles shows that when inflation slows alongside a weakening job market, gold prices tend to rally by an average of 5% to 10% in the following weeks. Positioning long-call options on gold ahead of these releases could yield high returns if inflation prints cooler than expected.
We also cannot ignore the 9.9% drop in West Texas Intermediate crude prices, which is helping to cool broader inflationary pressures. Lower energy costs historically weaken the Fed’s hawkish stance, which further supports the upward momentum for bullion. Derivative traders should consider using oil puts or gold calls to capitalize on this correlating market behavior.
Technically, we are witnessing gold challenge its key 100-day Simple Moving Average at $4,390 after successfully clearing the 50-day average. If we see a clean breakout above $4,390, the path of least resistance points toward $4,450 and potentially the psychological $4,500 barrier. We recommend setting stop-losses near the newly established support at $4,202 to manage downside risk during potential short-term pullbacks.
