XAU/USD waits for time before retesting record highs as US jobs data looms

The price of gold is on pace to produce a sustained move above the $2,500 mark in the Asian session on Thursday, as traders turn their attention to key US ADP labor change and ISM services PMI data to be released later in the day.

Gold price cheers boosted bets for huge Fed rate cut

The price of gold bounced back from key near-term daily support, then at $2,485, following a brief dip below it, while the US dollar (USD) succumbed to bearish pressure from increased expectations that the US Federal Reserve ( Fed) will opt. for a 50 basis point (bps) interest rate cut at its September 17-18 policy meeting.

The weak US ISM manufacturing PMI was joined by further signs of cooling in the labor market, reflected by the decline in the US jobs survey released by JOLTS on Wednesday.

U.S. job openings fell to a 3½-year low in July to 7.67 million, following June’s 7.9 million (revised from 8.1 million) openings, while below market expectations of 8.1 million. Markets are now pricing in a 45% chance of a 50bps rate cut by the Fed later this month, up from 31% earlier this week, according to CME Group’s FedWatch tool.

USD meets fresh supply again and languishes in multi-day troughs following dovish remarks from San Francisco Fed President Mary Daly. Daly said that “the Fed needs to cut the policy rate because inflation is falling and the economy is slowing.” In addition to the rate cut, she said “we don’t know yet,” adding that they “need more data, including Friday’s labor market report and CPI.”

Therefore, US non-farm payrolls and wage inflation data due on Friday are most important in helping markets gauge the size of the Fed’s interest rate cut this month. Meanwhile. Gold traders will look for cues from ADP’s private sector jobs report, PMI jobless claims data and ISM services due on Thursday.

This data is likely to have a notable impact on the performance of the US dollar in general, in turn influencing gold price action in the short term. Disappointing US employment data could double Fed sentiment, bolstering bets for an outsized Fed rate cut in September and gold prices.

Gold Price Technical Analysis: Daily Chart

The short-term technical outlook for the gold price also remains in favor of buyers as the 21-day simple moving average (SMA), now at $2,490, continues to hold the fort.

The 14-day Relative Strength Index (RSI) is rising above the 50 level, adding credence to gold’s bullish potential.

On the other hand, recapturing the $2,500 level on a daily closing basis is essential for the gold price to resume its upward trajectory. The next relevant barrier on the upside is seen at the record level of $2,532, above which the psychological level of $2,550 will be tested.

If the corrective downside regains momentum, Goild price needs a daily close below the 21-day SMA at $2,490, below which this week’s low of $2,472 will be contested.

Below, sellers will need to break the symmetric triangular resistance turned support at $2,460. A new downtrend would initiate below this support level as it targets the $2,430 area, where the triangular support line and 50-day SMA are approaching.