Gold prices rose this week, helped by lower real yields and dovish comments from Powell. With inflation expectations increasing, Treasury yields stayed steady, supporting gold prices. The market is now focused on US labor market data, culminating in the NFP report next Friday.

Market Reaction to Labor Data

If labor data is strong, it may increase the chances of a September interest rate cut, which could hurt gold prices. On the other hand, weak employment numbers could strengthen expectations for further easing, which would help boost gold. The overall outlook for gold is positive, mainly due to anticipated Fed easing, although short-term interest rate changes might lead to fluctuations. In daily analysis, gold is nearing the resistance level of 3,438. If it reaches this point, sellers may enter the market, pushing prices down to the support level of 3,245. Buyers, however, may aim for 3,500 if prices break higher. A minor upward trendline on the 4-hour chart supports the bullish momentum, helping buyers push to new highs. In the 1-hour analysis, buying interest remains around current levels, while sellers are targeting a break below the trendline, looking for a pullback to 3,350. Key upcoming events include US Jobless Claims data and the US PCE price index, both expected soon. Gold has steadily climbed this month due to expectations of further easing from the Federal Reserve. The July 2025 Non-Farm Payrolls report was weaker than expected, showing only 150,000 jobs, which has increased speculation that the Fed will cut rates again this year. This has lowered real yields, making non-yielding gold more appealing. Attention now turns to the August labor market report, which will be released next Friday, September 5th. Current CME FedWatch data indicates a 65% chance of a rate cut at the Fed’s September meeting. If the jobs number surprises on the high side, exceeding 200,000, it could challenge this expectation and lead to a sharp drop in gold prices.

Strategic Approaches for Traders

Alternatively, if the report is soft, especially below 125,000, it would likely ensure a rate cut in September and increase expectations for a third cut by year-end. This trend was observed throughout late 2024, as weak economic data consistently led to a more dovish stance from the central bank. Such a scenario would give another significant boost to gold. From a derivatives perspective, as we near the key $3,438 resistance level, traders might think about buying put options to protect against a strong jobs report. This would shield against a possible drop back toward the $3,245 support level, benefiting from a hawkish adjustment in interest rate expectations. On the flip side, if gold breaks above the $3,438 resistance, especially driven by weak economic data, it would signal strong bullish momentum. Traders could then consider using call options or going long on futures contracts to aim for the next psychological level of $3,500, aligning with the overall uptrend spurred by the Fed’s easing cycle. On a shorter timeframe, we are monitoring a minor upward trendline that has supported recent price movement. A drop below this trendline could signal sellers to prepare for a pullback toward the $3,350 level, which may happen even before next week’s major data releases if market sentiment changes. Create your live VT Markets account and start trading now.

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