#Gold Technical Analysis# On Wednesday (September 4th), during the US trading session, spurred by weak US job vacancy data, the gold price surged in the short term, reaching $2500/ounce at one point. Next, gold traders will face more employment market data, which is expected to bring new trends.
Due to the decline in US job vacancy data, the possibility of a significant interest rate cut by the Federal Reserve in September has increased, leading to a weaker US dollar and a decrease in US bond yields. As a result, the price of gold reversed and rose on Wednesday.
During the European trading session on Wednesday, the price of gold dropped to $2471.69/ounce before steadily climbing. As the New York session began, the price of gold continued to rise.
Data on Wednesday indicated that US job vacancies in July fell to their lowest level since early 2021, with an increase in layoffs consistent with signs of a slowdown in other labor demand.
The Job Openings and Labor Turnover Survey (JOLTS) released by the US Bureau of Labor Statistics on Wednesday showed that job vacancies decreased from a revised 7.91 million in the previous month to 7.67 million. The data was lower than the expectations of all surveyed economists.
The JOLTS job vacancy report is one of the labor force indicators that US Treasury Secretary Yellen values most when she served as the chair of the Fed. This indicator is also data that the Fed is highly concerned about in the labor market.
After the release of disappointing job vacancy data, the price of gold quickly surged to $2500.26/ounce, reaching the daily high point.
(Spot gold 30-minute chart, source: 24K99)
As of Wednesday's close, spot gold rose 0.1% to $2495.22 per ounce.
FXStreet analyst Christian Borjon Valencia pointed out that the price of gold rebounded on Wednesday after touching a daily low of $2471 per ounce. After the weaker-than-expected job vacancy data released in the United States increased the possibility of a 50 basis point interest rate cut by the Federal Reserve, gold prices rose in the North American market. The decline in US Treasury yields and the weakness of the US dollar supported gold.
After the data was released, US Treasury yields fell, with the yield on the 10-year benchmark Treasury bond falling by nearly 6 basis points to 3.776%. Traders increased their bets on a significant interest rate cut by the Federal Reserve. The US Dollar Index (DXY), which tracks the performance of six currencies against the US dollar, fell by 0.37% to 101.38.
According to CME's "FedWatch" tool, the probability of a 50 basis point interest rate hike at the September Fed meeting has increased to 43%. The next Federal Open Market Committee (FOMC) meeting will be held on September 17-18.
"Mini Non-Farm Payrolls" Coming on Thursday
Valencia said that gold traders are preparing for a new round of US employment data. The US ADP employment change, initial jobless claims, and non-farm payrolls will be released later this week.
The estimated increase in ADP employment in August is expected to rise from 0.122 million in July to 0.15 million.
In addition, the expected increase in non-farm payroll employment in August is expected to rise from 0.114 million to 0.163 million, while the unemployment rate may drop from 4.3% to 4.2%.
An analyst at Commerzbank pointed out that if the U.S. employment report is significantly weak, speculation about U.S. economic recession and faster rate cuts will re-emerge, which will further support the gold price.
David Meger, Chief Trading Strategist for High Ridge Futures, stated that vacancy data indicates a slight slowdown in the US economy, leading to a pullback in the US dollar and continuing low interest rates, which provides support for the gold market. In addition, the 'ADP Non-Farm Payrolls' and initial jobless claims reports to be released on Thursday, as well as the Non-Farm Payrolls report on Friday, will be closely watched as the market seeks clues for the Fed's interest rate cut path.
Peter A. Grant, Vice President and Senior Metals Strategist for Zaner Metals, said the market expects a 100 basis point interest rate cut before the end of the year, which means one of the three upcoming FOMC meetings will see a 50 basis point cut, but it is unlikely to be the first meeting.
Gold, which does not generate interest, often thrives in a low interest rate environment.
How to trade gold?
Valencia pointed out that with the appearance of a 'tweezers bottom' pattern, the upward trend in gold prices resumed on Wednesday, but buyers need to clear a key resistance level, and if so, the price of gold may test the high point from the beginning of the year.
The momentum, measured by the Relative Strength Index (RSI), suggests that buyers are in control of the market, but with a tendency to flatten in the short term.
Valencia stated that if the closing price of gold is above $2500/ounce, the next resistance level will be the historical high of $2531/ounce, followed by the $2550/ounce level. Once the latter is broken, the price of gold will target $2600/ounce.
(Spot gold daily chart source: FXStreet)
On the contrary, if the price of gold remains below $2500 per ounce, the next resistance will be the low point on August 22nd at $2470 per ounce.
If it falls below $2470 per ounce, the next support level for the price of gold will be the previous resistance level and the 50-day Simple Moving Average (SMA) confluence point on April 12th, around $2431 per ounce.
At 08:17 Beijing time, spot gold is trading at $2496.03 per ounce.