Gold held near $2,500 an ounce on Thursday, as investors awaited a key US jobs report for further insight into the extent of the Federal Reserve’s interest rate cuts, which could reduce the opportunity cost of holding non-yielding gold.
JOLTS data released on Wednesday showed a drop in the number of job openings to 2021 lows, much larger than anticipated, confirming fears of a deteriorating labour market and fuelling speculation about a significant 50 basis point cut by the Fed this month. This, together with the significant decline in US factory activity reported by the ISM PMI, has cast doubts over the ability of the US economy to withstand interest rate hikes. As a result, investors have raised their expectations over the Fed’s last three meetings this year in terms of rate cuts from a consensus of 100 basis points last week to 125 basis points.
The drop in gold prices below the psychological $2,500 mark has fuelled bearish sentiment around the yellow metal. However, the Fed’s upcoming rate cut in mid-September could provide a platform for the commodity’s recovery. This week’s highlight is the Non-Farm Payrolls data that will determine how deep the rate cut will be. According to the CME FedWatch Tool, 61% of traders expect the Fed to announce a cut of 25 basis points. However, the cut could change, if the NFP figure misses the forecast, with a projected figure of 164k.
From a technical perspective, there is no change in the outlook for XAUUSD and the intraday bias remains neutral first. Important support for now is at $2470. A drop below this price level will confirm the short-term downtrend with a possibility to test $2451 and $2432. Price is currently in the middle range at $2500 [below the 200-period EMA]. A move above $2507 would disperse the bears’ hopes and the price could retest the ATH area.
XAGUSD – Silver prices slumped on Wednesday, reflecting market uncertainty, as traders recalibrated their positions in the precious metals sector. As of today, Silver is trading at $28.22 per troy ounce. The prospect of a US recession dampened demand prospects for materials including Silver, prompting traders to rush for safer assets such as the Dollar, Yen and government bonds.
The decline comes amid fluctuating economic signals, with investors closely assessing the potential impact of central bank policies on inflation and interest rates. With inflation concerns not entirely dissipated, Silver, which is often considered a hedge, has seen a recent decline in demand. Analysts note that broader movements in precious metals, particularly Gold, have affected silver’s price dynamics. Silver has mirrored the downward trend as gold prices remain depressed.
Meanwhile, industrial demand for Silver, fuelled by the solar energy and electronics sectors, provides a buffer against a sharper decline. However, the balance between investment demand and industrial use remains fragile. As traders prepare to await further economic data later this week, silver investors will be watching closely to see if the market rallies again or continues to weaken.
From a technical perspective, there is no change in the outlook for XAGUSD and the intraday bias remains negative. Minor support for now is at $27.65. A drop below this price level will confirm a continued downtrend with a possibility to test $26.34 and the important support of $25.99, a partial reflection point of the past. The price is currently at the middle BB [20-period SMA] at $28.22. The move to the upside will encounter an obstacle of the $28.76 neckline of the H4 head and shoulder pattern. The next resistance is at the right shoulder and head, at $29.63 and $30.17 respectively.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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