Gold prices dropped by 0.80% due to a stronger US Dollar, following a strong US Nonfarm Payrolls report that raised doubts about potential interest rate cuts by the Federal Reserve. Currently, XAU/USD is priced at $3,332, down from a high of $3,365 earlier in the day. The US employment report for June exceeded expectations and outperformed May’s figures. Unemployment fell close to 4%, suggesting a robust labor market, which contrasts with the earlier ADP National Employment Change report.

Dollar And Treasury Yields Rise

The Dollar strengthened, aided by increasing US Treasury yields. Futures now indicate two potential rate cuts by 2025, a shift from early July when the market expected 65 basis points of cuts by the end of the year. US Treasury Secretary Scott Bessent discussed future trade deals, including the recent agreement with Vietnam. Meanwhile, discussions in the US House continue regarding Trump’s proposed “One Big Beautiful Bill,” which aims for a $3.3 trillion debt increase over a decade. Gold continues to face pressure as US Treasury yields and the Dollar rise, with the US 10-year yield increasing by five basis points to 4.334%. Encouraging data from ISM Services PMI and initial jobless claims further strengthens the Dollar, impacting gold’s outlook. Globally, central banks bought 20 tonnes of gold in May, primarily from Kazakhstan and Turkey. Gold prices might stabilize, but traders need to break the $3,400 level to aim for $3,500. If prices drop below $3,300, further declines may occur.

Labor Market And Economic Data

Friday’s strong payroll data clearly boosted the Dollar, causing gold to decline. A strong job market makes it harder for the Federal Reserve to consider quick monetary easing. The June report showed significant developments, such as falling unemployment and improvements over May’s numbers, highlighting ongoing economic strength in the US. US Treasury yields rose in response to these reports, with the 10-year yield climbing five basis points to 4.334%. This increase raises the opportunity cost of holding non-yielding assets like gold, leading to reduced interest in it. Fed funds futures trading reflects this change. Earlier in July, markets expected more than half a percentage point of cuts this year. Now, traders have adjusted their outlook to just two modest reductions by the end of 2025. This quick shift indicates uncertainty around easier monetary policy. Support for bond yields and the Dollar came from positive data in the services sector and strong initial jobless claims, showing steady economic activity and making it tougher for Fed officials to lean toward early rate cuts. On a global level, central banks are approaching gold purchases cautiously. The 20 tonnes bought in May, mainly by Kazakhstan and Turkey, signal stable demand but not aggressive buying, aligned with a wait-and-see approach linked to policy clarity from major Western nations. Technical levels remain stable. Bulls need to gain momentum above $3,400 to push towards $3,500. Without that breakthrough, prices may stagnate or decline if they break below $3,300, which is a critical level to watch in the coming days. Trading volumes have decreased since the US economic data was released, increasing the risk of abrupt price changes. As Bessent discusses trade initiatives post-Vietnam agreement, it’s vital to consider the broader implications of debt expansion proposals like the “One Big Beautiful Bill.” These could impact fiscal expectations and interest rates in the future. Those trading futures or options linked to XAU/USD should reevaluate their positions, especially if Federal Reserve officials change their tone in upcoming statements. Typically, gold prices are closely linked with interest rate expectations, and recent data has demonstrated how sensitive current price movements are to changes in views about US economic resilience. Future sessions, particularly those with new labor and inflation data, could lead to increased volatility if there are surprises that differ from consensus predictions. For now, the balance between inflation control and job market strength continues to shape market direction. Create your live VT Markets account and start trading now.

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