The U.S. Dollar Index pulled back on Thursday after gaining ground earlier in the week. The 10-Year U.S. Treasury yield eased ahead of Friday’s Nonfarm Payrolls report. Both moved in the right direction for Spot Gold (XAUUSD) after spending the first half of the week sitting directly on top of it.
New York Federal Reserve President John Williams said inflation risks tied to the Middle East conflict may not be long-lasting. The market spent Monday through Wednesday pricing a possible rate hike. Williams just told you the Fed does not see it that way. Combine that with crude oil falling more than 3% and the rate picture looks completely different than it did yesterday.
Jobs Data Sends Mixed Signals
Thursday’s jobless claims came in slightly higher than expected. Earlier in the week ADP reported 122,000 private-sector jobs added in May and that number beat expectations. The labor market is not falling apart but jobless claims ticking higher tells you it is not as tight as the ADP number suggested either. The data is pointing in two directions at once.
Friday’s Nonfarm Payrolls settles it. A strong number pushes the 10-Year U.S. Treasury yield and the U.S. Dollar Index higher and takes back what Spot Gold (XAUUSD) gained today. A weak number confirms the softening and gives the rate-cut case more room to build. Everything gold did on Thursday gets tested on Friday morning.
What to Watch
The ceasefire between Israel and Lebanon took West Texas Intermediate crude oil down more than 3% on Thursday and that is the single biggest reason Spot Gold (XAUUSD) rallied 1.6%. Lower crude oil pulls inflation expectations lower. That gives the Fed room it did not have 24 hours ago. New York Federal Reserve President John Williams reinforced that by saying Middle East inflation risks may not be lasting. The rate-cut trade that was dead on Wednesday is back on the table. Friday’s Nonfarm Payrolls is the next gate. A weak number extends the bid. A strong number puts the 10-Year U.S. Treasury yield and the U.S. Dollar Index back in control and shuts the rate-cut conversation down again.
The 200-day moving average at $4,423.23 held again on Thursday with buyers stepping in at $4,423.96. That is the third successful test since January. Spot Gold (XAUUSD) pushed back above the bull/bear line at $4,481.78 but resistance sits at $4,495.33 and $4,541.88 before a run at the 50-day moving average at $4,628.99. A sustained hold above $4,481.78 keeps the bid alive. A failure at the 200-day moving average opens the door to $4,366.23 and potentially the March 23 main bottom at $4,099.12.
