U.S. Non-Farm Payrolls data approaching, gold prices face short-term pressure seeking support

Gold (XAU/USD) experienced a pullback after the Asian session opened on Thursday, with the previously touched weekly high struggling to hold. Market analysts point out that the signing of the US-Vietnam trade agreement has alleviated global trade tensions, directly weakening investors’ demand for safe-haven assets. Meanwhile, the US dollar has shown mild appreciation against major currencies, adding additional downward pressure on precious metals.

Although gold faces a recent correction, the trading community generally believes that the downside is limited. The key lies in the subtle shift occurring in the Federal Reserve’s policy stance. The day before, US ADP private sector employment data fell short of expectations, signaling rising unemployment concerns, which further reinforced market expectations for the Fed to initiate a rate cut cycle. Data from trading platforms show that investors currently price in about a 25% chance of a rate cut by the Fed at the end of July, with a September cut now largely consensus.

Weak Employment Data Fuels Rate Cut Expectations, Long-term Support for Gold Remains Unchanged

The latest employment data reveal the fragility of the US labor market. The ADP report shows that US private sector employment unexpectedly declined by 33,000 in June, marking the largest monthly drop in over two years. Coupled with the soft trend in job vacancies and labor turnover survey (JOLTS), it is clear that the labor market is cooling.

This trend is prompting the market to reassess the Fed’s policy path. Dovish expectations for the central bank are exerting downward pressure on the dollar—difficult for the dollar to rebound strongly from a three-and-a-half-year low—leaving room for a rebound in non-yielding gold. Market traders are now focusing on the upcoming US Non-Farm Payrolls (NFP) report for more clues on the central bank’s policy direction.

Meanwhile, negotiations between the US and India on tax cuts are still progressing, with the Trump administration’s July 9 deadline approaching. Although short-term risk sentiment benefits from trade negotiations, uncertainty still clouds the market, providing additional support for precious metals.

Technical Outlook Shows Bullish Formation, Bullish Opportunity Window Opens

From a technical perspective, gold prices have stabilized above the 200-hour simple moving average (SMA), and the daily oscillator is regaining positive momentum, indicating that upward momentum is building. This signal is crucial for bulls.

Current support is positioned around $3,330-$3,329 (near the 200-hour SMA), serving as a key entry point for short-term buyers. If this support holds, gold will maintain its upward channel. However, a decisive break below this level could trigger technical selling, pushing the commodity further toward the $3,300 round number.

On the resistance side, the $3,363-$3,365 zone (Wednesday’s weekly high) presents an immediate obstacle. A breakout above this level targets the $3,400 mark. If this level is also breached and sustained above, it would completely negate the short-term negative outlook, and gold could then aim for the secondary resistance zone at $3,435-$3,440.

Traders may consider seeking buying opportunities near support levels, while also paying attention to the release timing of US non-farm data and its potential guiding effect on gold price movements.