Gold gains as tepid U.S. jobs data revives Fed rate cut bets

Gold prices gained on Monday, deriving support from a soft U.S. dollar after a weaker-than-expected jobs report revived expectations that Federal Reserve will cut interest rates this year.

Spot gold was up 0.8% at $2,320.33 per ounce. U.S. gold futures gained 0.9% to $2,329.10.

“On Friday, we saw a drop in the new job creation in the U.S., a slowdown more than predicted, and wage growth also slowed down, which creates some space for the Fed to start cutting rates in 2024,” said Ricardo Evangelista, senior analyst at ActivTrades.

The U.S. dollar dipped to its lowest level in about a month after the employment report revealed U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4% for the first time in nearly three years.

The data boosted bets of a September rate cut to 71% on Monday, as per CME’s FedWatch Tool. Lower interest rates reduce the opportunity cost of holding bullion and weigh on the U.S. currency, in which gold is priced.

“As several Fed officials are scheduled to deliver public speeches this week, gold traders will eagerly listen for further insights into the central bank’s monetary policy trajectory,” Evangelista said, adding that Middle East tensions are also lending support.

Israel’s military called on Palestinian civilians to evacuate Rafah as part of a ‘limited scope’ operation.

On a technical front, the first short-term hurdle the gold bulls face is likely the $2,350/365 near-term resistance zone, said Kelvin Wong, a senior market analyst for Asia Pacific at Oanda.

“A clearance above it sees the next immediate resistance coming in at $2,420 (current all-time high area) and $2,450 in the first step.”