Quick overview
- Gold (XAU/USD) continued its bullish rally, reaching around the 4,185 level due to weaker US employment data.
- The decline in US dollar value was influenced by reduced expectations for interest rate hikes by the Federal Reserve.
- Geopolitical tensions between the US and Iran, particularly regarding potential Israeli actions, are further supporting gold as a safe-haven asset.
- Investors are closely monitoring upcoming US economic reports for potential market direction.
During the early European trading session, Gold (XAU/USD) prolonged its bullish rally and drew some further bids around the 4,185 level. However, the reason behind its upward rally can be attributed to the release of weaker US monthly employment data, which forced traders to trim their bets for interest rate hikes by the US Federal Reserve. This situation put strong bearish pressure on the US dollar and contributed to the Gold gains.
Furthermore, the long lasting geopolitical tension between the US and Iran did not show any sign of slowing down, which is also supportting the safe-haven precious metal. The new tension sparked in this matter after a report said Israel may have planned to kill Iran top negotiators during peace talks. Meanwhile, Iran also warned it would respond quickly if the US interferes in the Strait of Hormuz This situation keeping demand for safe-haven assets like the US dollar and gold supported.
Looking forward, investors are keeping a close eye on the upcoming US economic reports for fresh market direction.
Weak US Data Pushes Gold Higher
On the US front, the US Dollar Index (DXY) trades lower near the 100.85 price zone and is set to finish the week with a 0.50% loss. This is because traders trimmed their bets for interest rate hikes by the US Federal Reserve following the release of weaker than expected US job data. On the data front, the closely watched US Nonfarm Payrolls (NFP) report showed that the economy added only 57,000 new jobs in June, compared to the expected 110,000 numbers. Moreover, the previous month reading was revised down from 172,000 to 129,000, while the Unemployment Rate edged lower to 4.2 percent in June.
As a result, many traders now believe the Federal Reserve will not increase interest rates soon. Markets now see less than 20 percent chance of a rate hike in July. This was seen as one of the key factors behind the US dollar’s decline, which pushed the Gold price higher above the 4,195 level.
Geopolitical Risks Support Gold Prices
On the geopolitical front, the New York Times reported that US officials believe Israel may be planning to target Iran’s top negotiators during peace talks. Officials say this could stop the talks and start a new war. Not only this, but Iran also warned it would respond quickly if the US gets involved in the Strait of Hormuz. This situation keeps tensions high and supports demand for safe-haven assets like gold.
Arslan Butt
Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.
His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.
His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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