Gold (XAU/USD) rose more than 2.50% on Wednesday, with softer US labour data weighing on the US Dollar (USD) and lower Oil prices, tied to hopes of reopening the Strait of Hormuz, reducing inflation worries and trimming expectations for Federal Reserve (Fed) tightening. The metal was trading near $4,185 after briefly moving above $4,200, its highest in over a month. ADP Employment Change increased by 44K in July versus forecasts of 70K and down from 98K in June, following weaker JOLTS Job Openings; attention now shifts to Friday’s Nonfarm Payrolls (NFP). Rate pricing also eased, as the CME FedWatch Tool put the chance of a September Fed hike at 56.9%, down from 67.2% the prior day, while policy is still expected to remain restrictive until inflation returns to 2%.
Geopolitics added to the backdrop, with talks involving the US, Iran and Oman pointing towards a potential interim arrangement, described as a temporary 60-day set-up aimed at restoring shipping. Technically, XAU/USD has moved above the 21-day Simple Moving Average (SMA) at $4,064 and is just over the 50-day SMA at $4,160; momentum gauges show the Relative Strength Index (RSI) around 57 and the Moving Average Convergence Divergence (MACD) positive. Resistance levels include $4,160 and then $4,200, with $4,398 near the 100-day SMA above, while support sits at $4,064 and then $4,000. NFP, part of the US Bureau of Labor Statistics monthly report excluding farm employment, tends to correlate positively with USD and negatively with Gold, and market reaction can be shaped by related components such as Average Weekly Earnings, Participation Rate and Average Weekly Hours.
Volatility Outlook and Trading Recommendations
We suggest derivative traders prepare for heightened volatility in XAU/USD as it hovers around $4,185 after briefly teasing the $4,200 resistance level. This sudden 2.5% surge is fueled by cooling US labor data and easing oil prices, which have lowered inflation fears and softened expectations for aggressive monetary policy. With gold hitting these historic highs in 2026 compared to its average trading price of around $2,300 in 2024, we believe the overall momentum is shifting back to the buyers.
All eyes are now on Friday’s upcoming Nonfarm Payrolls (NFP) report, which historically dictates the immediate direction of the US Dollar and precious metals. Given that the ADP report showed only 44,000 jobs added in July against the 70,000 expected, we should anticipate a softer NFP print to pressure the greenback even further. If the jobs data underperforms, we recommend positioning for a sustained breakout above the heavy $4,200 psychological barrier.
Geopolitical Developments and Technical Levels
Additionally, the easing of geopolitical tensions in the Middle East, specifically negotiations regarding the Strait of Hormuz, is lowering energy prices and stabilizing the broader market. While the CME FedWatch Tool shows the probability of a rate hike has dropped to 56.9%, we must remember that policymakers are still committed to a restrictive stance until inflation is firmly at 2%. Therefore, we should use structured options or tight stop-losses to hedge against sudden hawkish shifts in interest rate expectations.
From a technical perspective, we see that XAU/USD is trading constructively above its 50-day Simple Moving Average at $4,160, supported by an improving Relative Strength Index of 57. If we get a daily close above $4,200, the path clears for a move toward the 100-day SMA near $4,398. On the flip side, we advise keeping a close watch on the $4,064 support level, as a break below this key area could trigger a deeper correction toward the $4,000 floor.
