Gold price trades with positive bias below $3,400, multi-week top ahead of US NFP

Gold price regains positive traction following Thursday’s late pullback from a multi-week high.
The US-China trade talks optimism might hold back the XAU/USD bulls from placing fresh bets.
A modest USD uptick might contribute to capping the commodity ahead of the US NFP report.

Gold price (XAU/USD) attracts some dip-buying during the Asian session on Friday and reverses a part of the previous day's retracement slide from levels just above the $3,400 mark or over a four-week peak. The commodity, however, remains confined in a multi-day-old range as traders seem reluctant to place aggressive bets and opt to wait for the release of the closely-watched US monthly employment details. The popularly known Nonfarm Payrolls (NFP) report will play a key role in influencing market expectations about the Federal Reserve's (Fed) rate-cut path, which, in turn, will drive the US Dollar (USD) and provide a fresh impetus to the non-yielding yellow metal.

Heading into the key data risk, some repositioning trade assists the USD to gain some positive traction and move away from its lowest level since April 22 touched on Thursday. Moreover, the optimism over renewed trade talks between the US and China – the world's two largest economies – might contribute to capping the upside for the safe-haven Gold price. This makes it prudent to wait for sustained strength and acceptance above the $3,400 round figure before traders start positioning for any further near-term appreciating move. Nevertheless, the XAU/USD pair remains on track to register modest weekly gains and the supportive fundamental backdrop favors bullish traders.

Daily Digest Market Movers: Gold price benefits from repositioning trades ahead of US NFP report

US President Donald Trump and Chinese leader Xi Jinping agreed to further talks to settle trade disputes. Moreover, Trump said that the call was focused almost entirely on trade and resulted in a very positive conclusion, triggering an intraday pullback in the Gold price from over a four-week high on Thursday.
The initial market reaction, however, turns out to be short-lived on the back of Trump's rapidly shifting stance on trade policies. Adding to this, some repositioning trade ahead of the US Nonfarm Payrolls (NFP) report assists the XAU/USD pair to regain some positive traction during the Asian session on Friday.
The impactful US monthly employment data is expected to show that the world's largest economy added 130,000 new jobs in May following the stronger-than-expected 177,000 rise recorded in the previous month. Meanwhile, the Unemployment Rate is anticipated to hold steady at 4.2% during the reported month.
A host of other employment readings released this week pointed to a cooling in the US labor market, which should give the Federal Reserve more impetus to cut interest rates. Traders are currently pricing in the possibility that the US central bank will deliver at least two 25 basis points rate cuts by the year-end.
However, recent comments from a slew of Fed officials suggested that the US central bank might stick to the wait-and-see approach amid persistent trade-related uncertainties. Hence, the crucial US employment details will be looked upon for fresh insight into the Fed's policy outlook and drive the US Dollar.

Gold price bulls might now wait for sustained strength beyond $3,400 before placing fresh bets

From a technical perspective, the top boundary of a multi-day-old range, around the $3,400 round figure, now seems to have emerged as an immediate barrier. Given that oscillators on the daily chart are holding in positive territory, a sustained strength beyond the said handle will be seen as a fresh trigger for bulls. The subsequent move-up could lift the Gold price to the $3,433-3,435 intermediate hurdle en route to the $3,500 neighborhood, or the all-time peak set in April.

On the flip side, the $3,334-3,333 area, or the lower end of the range, might continue to protect the immediate downside. Some follow-through selling, leading to a subsequent slide below the $3,326-3,324 horizontal resistance breakpoint, now turned support, could drag the Gold price below the $3,300 round figure, to the $3,286-3,285 region.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.