U.S. non-farm payroll data pending, gold prices are under pressure amid trade optimism and a strengthening dollar.

Gold prices are caught in a dilemma. After breaking a one-month high earlier this week, gold faced profit-taking pressure during the Asian session and is currently hovering near recent support levels. Factors driving this correction include the signing of the US-Vietnam trade agreement and a mild rebound in the US dollar, both of which have weakened the appeal of safe-haven assets.

Trade Agreements and Employment Data Become Key Variables Recently

The new trade agreement between the Trump administration and Vietnam has boosted market risk appetite. According to the agreement, the US will impose a 20% lower tariff rate on imports from Vietnam, while Vietnam will open its markets to US goods. Meanwhile, negotiations between India and the US are also progressing, with both sides aiming to reach a tax reduction agreement before July 9. These developments have alleviated market concerns about a prolonged trade war, leading to increased risk asset purchases and putting pressure on non-yielding gold.

However, trade negotiations with Japan have stalled, leaving uncertainties related to tariffs still unresolved. This situation provides some support for precious metals.

From the labor market perspective, the situation is more complex. The US ADP private sector employment report released last Wednesday showed disappointing data—private sector employment declined for the first time in over two years, with a monthly decrease of 33,000 jobs, far below the expected revised increase of 29,000. Coupled with earlier reports on job vacancies and labor flow (JOLTS) indicating a deterioration in hiring conditions, signals of labor market weakness are becoming more evident.

Fed Rate Cut Expectations Support Medium-Term Gold Outlook

Weak employment data have strengthened market expectations for a Fed rate cut. Traders currently estimate nearly a 25% chance that the Fed will start cutting rates at the July 29-30 meeting, with the possibility of a 25 basis point cut in September almost certain. The market generally expects two rate cuts before the end of this year.

This dovish outlook should curb further appreciation of the US dollar. The dollar remains near a three-and-a-half-year low, with limited room for a mild rebound. Accordingly, non-yielding gold prices are likely to find some support, and significant depreciation seems limited. Additionally, concerns that US fiscal conditions may worsen further after the release of Trump’s budget proposal also support gold.

Technical Bullish Pattern Clear, Focus on Key Support and Resistance Levels

From a technical perspective, gold prices broke above the 200-hour simple moving average (SMA) this week, a key bullish signal. Technical indicators on the daily chart are regaining positive momentum, suggesting the path of least resistance is upward.

Current support is around $3,330-$3,329 (near the 200-hour SMA). If this support is effectively broken, gold could further decline toward the $3,300 level, triggering technical sell-offs.

On the upside, the $3,363-$3,365 zone (the weekly high reached this week) forms the first immediate resistance. A breakout above this zone could see gold challenge the $3,400 level. Sustained strength above $3,400 would negate the short-term negative outlook, and gold could then target the next significant barrier around $3,435-$3,440.

US Non-Farm Payrolls as the Next Turning Point

Market participants are turning their attention to the release of the US Non-Farm Payrolls (NFP) report. This data will provide crucial clues about the Federal Reserve’s monetary policy direction and determine the short-term trend of gold. In the context of weak hiring, if the NFP continues to show labor market softness, it will further reinforce expectations for rate cuts, benefiting gold prices. Buying opportunities on dips may appear near support levels.