Gold recovers above $4,150 as US yields retreat ahead of US September jobs data
- Gold price recovers some lost ground to around $4,180 in Friday’s early Asian session.
- US Treasury yields eased across the curve, with the 10-year retreating from the highest since 2002.
- The US September employment data will take center stage on Friday.
Gold price (XAU/USD) rises to near $4,180 during the early Asian session on Friday. The precious metal rebounds as US Treasury bond yields retreat from multi-decade highs. However, the potential upside might be limited amid lingering inflation concerns from elevated energy costs and the prospect of higher US interest rates.
The US 10-year Treasury yield, a yardstick for global borrowing costs and asset prices, eased to 5.24% afterspiking earlier in the session to 5.34%, reaching a new multi-decade peak. The 30-year Treasury bond yield similarly hovered near levels not seen in 24 years before moderating into the close.
“Geopolitical uncertainty, particularly around the stalled US-Iran ceasefire discussions, continues to provide a safe-haven underpinning, while higher oil prices remain an inflation risk,” said Manav Modi, commodity analyst Motilal Oswal Financial Services Ltd.
All eyes will be on the US September employment data on Friday, which could offer some hints about the US interest rate path. Economists expect the Nonfarm Payrolls to show an increase of 90,000 job additions in September, versus 162,000 prior. The Unemployment Rate is projected to stay unchanged at 4.1% during the same period.
"Anything that would increase the likelihood of a Fed rate hike would certainly dent sentiment in the gold market. Any additional strong rise in energy prices or any escalation in the Middle East would also do the same," said David Meger, director of metals trading at High Ridge Futures.
Gold softens as elevated US real yields and PCE revisions temper inflation narrative
According to analysts at UOB Group, “Gold spot reversed earlier gains – which saw it trade as high as $4,219/oz – to close 0.6% lower at $4,157/oz as elevated real yields continued to cap the bullion's upside.” On the macro side, UOB Group notes that “US headline PCE rose 0.3% m/m in Aug, in line with estimates, while the y/y rate fell to 3.4% from 3.7% in prior month,” adding that recent “BEA methodology revisions improved the optics but did not materially alter the underlying inflation narrative.”
Technical Analysis: Gold retains a negative outlook below the 100-day SMA
In the daily chart, XAU/USD maintains a bearish near-term bias as price holds below the 100-day moving average (MA) and the Bollinger Bands’ 20-day simple moving average (SMA). The metal is hovering closer to the lower half of the Bollinger envelope, while the 14-day Relative Strength Index around 40.83 stays in neutral-to-soft territory, which suggests subdued bullish momentum and leaves the downside exposed while these overhead averages cap recovery attempts.
On the topside, initial resistance emerges at the 100-day MA at $4,285, followed by the Bollinger 20-day SMA at $4,300, with a stronger barrier at the upper Bollinger band around $4,470. On the downside, immediate support is located at the lower Bollinger band near $4,130; a sustained break below this band would reinforce the bearish bias and open the door for a deeper slide, while a daily close back above the clustered moving averages would be needed to ease the current downside pressure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.