Gold (XAU/USD) held a firm tone into Thursday’s European trade but stayed below $4,450 as softer US yields and a weak US ADP reading kept the US Dollar (USD) on the back foot. Support from that backdrop was tempered by expectations of tighter US monetary policy and inflation risks linked to higher energy prices, factors that could lift yields and curb demand for non-yielding bullion. Geopolitical tensions also bolstered the safe-haven USD, while traders looked ahead to Friday’s US Nonfarm Payrolls (NFP) report for guidance on the Federal Reserve (Fed) path.
CME Group’s FedWatch Tool showed a 62% probability of a Fed rate rise at the September 15-16 meeting, an expectation reinforced after hawkish remarks from Fed Chair Kevin Warsh. Oil traded near its highest level since July 24 after fresh US strikes on Iranian targets and retaliatory attacks from Tehran, alongside comments from US President Donald Trump that he was prepared to launch another strike. Technically, gold closed above the 23.6% Fibonacci retracement, with resistance at the 38.2% level near $4,438; MACD turned positive and RSI sat near 49. A break higher targets the 100-period SMA at $4,480, then $4,487 and $4,535, with $4,604 and $4,692 beyond, while support sits at $4,378 and then $4,282.
Market Catalysts and Risks for Gold
We suggest derivative traders tread carefully in the coming weeks as gold hovers just below the $4,450 mark. While a soft US ADP private payrolls report has recently weakened the US Dollar, falling bond yields are providing a temporary floor for the precious metal. However, we must closely watch the US 10-year Treasury yield, which is holding near 4.15%, as any sudden bounce could quickly snuff out this gold recovery.
The primary driver of market volatility right now is the upcoming Federal Reserve policy meeting on September 15-16. According to the CME FedWatch Tool, traders are currently pricing in a 62% probability of a rate hike. We believe this rate-hike risk, combined with stubborn inflation, will keep a tight lid on non-yielding assets like gold.
Geopolitical tensions in the Middle East are also complicating the outlook, with recent clashes in the Strait of Hormuz pushing Brent crude oil prices toward $88 per barrel. President Trump’s warnings of potential further strikes on Iranian targets are driving safe-haven flows back into the greenback. We recommend waiting to see if these energy-driven inflation fears will force the Fed to remain aggressive, which would ultimately strengthen the US dollar.
Technical Levels and Trading Strategies
The immediate catalyst for a breakout will be Friday’s US Nonfarm Payrolls report, where consensus estimates project a steady increase in jobs. A stronger-than-expected jobs print will likely cement the Fed’s hawkish path and trigger a sharp sell-off in gold. We advise derivative traders to remain sidelined or focus on short-term option strategies until this crucial data is released.
On the technical side, gold faces stiff resistance at the 38.2% Fibonacci retracement level of $4,438. If we see a daily close above this barrier, the next targets for bullish traders will be the 100-period SMA at $4,480. Conversely, a failure to break higher could quickly drag prices down to key support at $4,378, with a deeper floor waiting near $4,282.
