Gold price turns cautious near $2,525 ahead of US NFP report

• The gold price continues to draw support from the bullish side on the Fed-inspired USD selloff.
• Concerns about a US economic recession are further supporting the safe-haven metal.
• Traders are becoming cautious ahead of the release of crucial US employment details.

The price of gold (XAU/USD) climbed closer to the $2,524-$2,525 supply zone on Thursday amid further selling in the US dollar (USD), led by bets for more interest rate cuts by the Federal Reserve ( Fed) at the end of this month. A mixed series of employment data out of the United States (US) this week suggested the labor market was losing momentum and sparked concerns about the health of the economy. That, in turn, raised market expectations about the possibility of more aggressive policy easing by the Fed, which dragged the USD from a two-week high hit on Tuesday and benefited the yield-free yellow metal.

Meanwhile, renewed fears of a slowdown in the world’s largest economy have tempered investors’ appetite for riskier assets. This, along with lingering geopolitical tensions, proved to be another factor supporting demand for gold prices. XAU/USD, however, remains below the all-time peak reached in August as traders choose to wait for the release of closely watched monthly US employment details later this Friday. The familiar Nonfarm Payrolls (NFP) report will be scrutinized for clues about the Fed’s rate cut path, which in turn will provide a new directional boost to the precious metal.

Daily Digest Market Movers: Gold prices benefit from bets on more Fed rate cut in September

• The ADP national employment report released on Thursday showed that US private sector employment rose by 99,000 in August, marking the smallest gain since January 2021.
• The reading was well below market expectations of 145,000 and was accompanied by a downward revision to the previous month’s print to 111,000 from 122,000 initially estimated.
• That comes on top of a report on Wednesday that showed job openings fell to 7.673 million, or a three-and-a-half-year low in July, and provided further evidence of a deteriorating labor market.
• The Institute for Supply Management (ISM) services PMI rose from 51.4 to 51.5 in August, while the Price Paid Index rose to 57.3 from 57 and the Employment Index fell to 50.2 from 51.1.
• Separately, the US Department of Labor (DoL) reported that initial jobless claims fell more than expected to 227,000 in the week ended August 31, from the previous weekly figure of 232,000.
• San Francisco Fed President Mary Daly said the U.S. central bank needs to calibrate policy to the evolving economy and cut policy rates as inflation is falling and the economy is slowing.
• Chicago Fed President Austan Goolsbee said on Friday that the longer-term trend in the labor market and inflation data warranted easing of interest rate policy soon and then steadily over the next year.
• According to CME Group’s FedWatch tool, markets are pricing in a 40 percent chance the Fed will cut borrowing costs by 50 basis points at its Sept. 17-18 policy meeting.
• Meanwhile, dovish expectations are keeping US Treasury yields lower and the US dollar bearish on the defensive, which in turn should act as a tailwind for the underperforming gold price.
• The market’s focus now turns to the crucial United States (NFP) report, which is expected to show that the economy added 160,000 jobs in August and the unemployment rate fell to 4.2%.

Technical Analysis: Gold Price Could Accelerate Upward Move Once $2,524-$2,525 Hurdle Is Cleared Decisively

Technically, the push beyond the immediate $2,524-$2,525 hurdle will be seen as a new trigger for bullish traders. Furthermore, the oscillators on the daily chart remain in positive territory and are still far from overbought territory. This in turn suggests that the path of least resistance for gold prices is up. Some further buying beyond the all-time high around the $2,531-$2,532 area reached on August 20 will reaffirm the constructive outlook and pave the way for a new appreciation move.

On the other hand, the psychological $2,500 mark now appears to protect the immediate downside below which the gold price could slide back to the horizontal support of $2,471-2,470. A convincing break below the latter will set the stage for deeper losses towards the 50-day simple moving average (SMA), currently pegged near the $2,440 region, en route to the $2,400 threshold and 100-day SMA, around the $2,388 area.