Gold 'Reverses Sharply' as US Employment Stalls... Reclaims $4,430 in One Go

▲ Gold/AI Generated Image

Gold has reclaimed $4,430 on the back of slowing private sector employment in the US.

According to FXLeaders on September 3 (local time), US private sector employment increased by only 38,000 in August, falling short of market expectations of approximately 48,000. Manufacturing employment decreased by 17,000, and professional and business services employment decreased by 16,000. Education and health services saw an increase of 45,000. Upon confirmation of the employment slowdown, gold quickly rebounded from below $4,300.

The outlook for the Federal Reserve's (Fed) September interest rate hike also eased somewhat. The market's implied probability of a 25bp hike fell from 66-67% before the ADP release to approximately 62%. The US 10-year Treasury yield also retreated to 4.78% from its recent nearly three-year high. As Treasury yields and the dollar weakened together, the pressure weighing on gold also decreased.

The next key indicator is the US Non-Farm Payrolls (NFP). If employment is stronger than expected, the probability of a September rate hike could once again exceed 70%. Conversely, if employment growth is weak and previous figures are revised downwards, the interest rate outlook could be significantly shaken. FXLeaders analyzed that if the latter scenario unfolds, gold could target the $4,500 level again.

On the charts, $4,459-$4,472 is the first hurdle to overcome. If this range is breached, $4,529.65 and $4,583.43 open up as the next resistance levels. On the downside, $4,366 and $4,304 are key support levels. FXLeaders viewed this rally as more of a rebound than a full trend reversal until the $4,459-$4,472 level is surpassed.

Middle East tensions also remain a variable supporting gold prices. However, FXLeaders cited US interest rates, the dollar, and employment data as more direct price variables than geopolitical risks. The analysis suggests that for gold to extend its gains after reclaiming $4,430, it needs to break through the $4,459-$4,472 resistance.

[Article Key Summary]

-Gold reclaimed $4,430 as US private sector employment in August increased by only 38,000.

-The probability of a September Fed rate hike decreased from 66-67% to approximately 62%, and the US 10-year Treasury yield also fell to 4.78%.

-Gold needs to break through $4,459-$4,472 to target the $4,529-$4,583 range.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*