Gold returns above $2,500 after US jobs data

• Gold recovers after the release of US below-parity data raises fresh concerns of a hard landing.
• The likelihood that the Fed will cut interest rates by half a percentage point at its September meeting rises to 45%.
• Technically, gold is forming two bullish Hammer candlesticks in a row, suggesting a chance for a recovery.

Gold (XAU/USD) is trading above $2,500 on Thursday, having rebounded from the previous day’s lows of $2,471 following the release of weaker-than-expected US jobs data in July, which kindled new harsh fears.

Gold price finds its feet after job data

Gold recovers after the release of weaker-than-expected US jobs data. This increased safe-haven demand for the yellow metal and default interest rates could fall faster than previously anticipated in the US – another positive for gold as it lowers the opportunity cost of holding the non-interest-paying asset.

The number of US JOLTS job openings fell to 7.673 million in July, from a downwardly revised 7.910 million in June and below estimates of 8.100 million, according to data from the US Bureau of Labor Statistics on Wednesday.

The data is feeding into the fragile US labor market narrative that is boosting interest rate expectations from the Federal Reserve (Fed) after Fed Chairman Jerome Powell sounded the warning on jobs in his speech at the Jackson Symposium Hole last month.

It follows weak US manufacturing data on Tuesday, which triggered a rapid plunge in the global market, which was further exacerbated by fears of the bursting of the artificial intelligence (AI) tech bubble.

From about 31% before the manufacturing and JOLTS data, the probability that the Fed will cut interest rates by 0.50% at the September 18 meeting, rather than the benchmark of 0.25%, has risen to 45%.

ADP employment changes and jobless claims follow on Thursday, but the main event on the calendar will be the US non-farm payrolls report on Friday. If NFPs rise less than expected, it would further support the case for more rate cuts.

On the geopolitical front, Reuters reports that US negotiators are preparing another cease-fire deal in Gaza as the war in Ukraine continues unabated.

Technical Analysis: Two Hammer candlesticks in a row could signal a reversal

Gold (XAU/USD) is showing two bullish-looking Japanese hammer candlesticks in a row (chart box below), and if Thursday closes as a solid green, that would confirm a possible resumption of the broader uptrend.

XAU/USD Daily Chart

The price of the yellow metal looks poised to return to the all-time high of $2,531 if it can maintain its bullish recovery momentum.

A bullish target for Gold, which has yet to be reached, is at $2,550 and remains active. The target was generated after the initial July-August eruption on August 14.

Gold’s medium and long-term trends also remain bullish, which, given the trend is your friend, means the odds favor an eventual bigger breakout materializing.

A break above the August 20 all-time high of $2,531 would provide more confirmation of a higher continuation towards the $2,550 target.

If gold continues to weaken steadily, however, it is likely to find the next support in the $2,470-$2,460 region. A decisive break below this level would change the picture for gold and suggest that the commodity could begin a more pronounced downtrend.