Gold stayed near its daily low in early European trading on Thursday. Still, it held above $5,050. It was also close to a near two-week low set the day before.
A stronger US Nonfarm Payrolls report lowered expectations for faster Federal Reserve rate cuts. January job gains came in at 130K, compared with a revised 48K previously and 70K expected.
The Unemployment Rate fell to 4.3% from 4.4%. Average Hourly Earnings stayed at 3.7%, above the 3.6% forecast. CME FedWatch showed markets pricing a 95% chance of no rate change in March, up from 80% the prior day.
Cleveland Fed President Beth Hammack said the labour market is moving toward balance and policy is close to neutral. She added that holding rates steady is the best way to reach 2% inflation. Kansas City Fed President Jeffrey Schmid warned that further rate cuts could keep inflation higher for longer.
The US Dollar rose after the data but did not show strong follow-through. Markets still expect two 25 bps cuts this year, with the first in July. Attention now turns to US consumer inflation on Friday and Weekly Initial Jobless Claims on Thursday.
Technical signals were mixed: MACD histogram 0.17, RSI 55.65, and the 200-period 4-hour SMA at $4,757.23. Key price levels include $5,004.47 (50% retracement), $5,144.94 (61.8% resistance), plus the 5,599.68 high and 4,409.26 low.
Yesterday’s strong jobs report sharply changed the odds of a March rate cut. Markets now see it as very likely the Fed will hold steady. That leaves gold in a difficult position: short-term data looks hawkish, while the broader view still points to two cuts later this year. For now, price is consolidating above the key $5,000 level.
This looks similar to early 2025. Back then, a few sticky inflation reports pushed the first expected rate cut from March to June. Today, wage growth at 3.7% is still higher than the last reported CPI inflation of 2.9% for December 2025. That gives the Fed a clear reason to wait. It also suggests the Fed will want more data before it signals any near-term cuts.
With gold pinned between $5,004 support and $5,144 resistance, the near-term approach is to trade the range. Very short-dated options strategies that benefit from low volatility, such as selling strangles, could work while the market waits for the next major data release.
The bigger move will likely come after the US consumer inflation report tomorrow. This is the key catalyst. It could either support the Fed’s cautious stance or bring back hopes for faster easing. Traders should expect a jump in volatility and a possible breakout from the current range.
If inflation is hotter than expected, gold could break below $5,004 as markets push rate-cut expectations even further out. If inflation is softer, it would support the case for a July cut and could help push price through $5,144. This is the “either/or” event that most traders are positioning around right now.
Even with the uncertainty, the broader trend stays positive as long as price remains above the 200-period moving average near $4,757. Longer-term expectations for eventual rate cuts, along with concerns about central bank policy, should keep supporting gold. Because of that, any sharp dip after the inflation data may be viewed as a potential buying opportunity.
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