Gold rose more than 1% on Friday after a softer US labour report damped expectations of tighter Federal Reserve policy. XAU\/USD traded at $4,174 after rebounding from an intraday low of $4,121, as rate pricing shifted and the US Dollar weakened. June Nonfarm Payrolls printed at 57K versus a 110K forecast, while the participation rate fell to 61.5, its lowest since March 2021, even as the unemployment rate edged down.<\/p>\n
Swaps pricing implied a 46% chance of a rate increase toward year-end, and the US Dollar Index (DXY) was flat at 100.83 but on track for a weekly loss of 0.52%. The US 10-year Treasury yield stood at 4.485%. Markets are set to scrutinise FOMC minutes and the July 14 US inflation report, alongside ISM Services PMI and Initial Jobless Claims for the week ending July 4, expected to rise to 219K from 215K. The World Gold Council reported official gold reserves rose a net 41 tons in May; it also said central banks added 1,136 tonnes worth around $70 billion in 2022. Technically, resistance levels include $4,200, $4,225-$4,250, $4,300 and the 200-day SMA at $4,402, while supports sit at $4,100, $4,050, $4,000, $3,941 and $3,900.<\/p>\n
Given the weak jobs report, we see a clear shift in the market’s thinking about future Federal Reserve rate hikes. The drop in rate hike probability to below 50% weakens the US Dollar, which is typically a strong tailwind for gold. This makes us more bullish on the metal in the short term.<\/p>\n
The upcoming US inflation report on July 14 is now the most critical data point we are watching. The last report showed core inflation was still persistent, running at an annual rate of 3.6%, so a softer number here could confirm the Fed’s hands are tied. We anticipate increased volatility around this release.<\/p>\n
Central bank demand remains a powerful underlying support for gold prices. Recent data from the second quarter shows they continued to be net buyers, adding over 200 tonnes to global reserves, which is a historically strong pace. This consistent buying creates a solid price floor and limits the downside risk for us.<\/p>\n
In the derivatives market, we are positioning for a potential move toward the $4,250 resistance level. We are looking at buying August call options with a strike price of $4,200, as this provides upside exposure if the bullish momentum continues. This strategy allows us to define our risk while capitalizing on a potential breakout.<\/p>\n
However, we must respect the longer-term bearish trend as long as the price remains below the 200-day moving average at $4,402. A surprisingly hot inflation reading or hawkish FOMC minutes could quickly reverse these gains. To manage this risk, we are also considering buying put options with a strike below $4,100 as a hedge against a sharp downturn.<\/p>\n\n\n\n