Gold price retreats from daily highs as US NFP dampens demand

• Gold peaked at $2,310 but reversed gains, unable to surpass the May 2 high of $2,326.
• US Nonfarm Payrolls missed expectations, leading to lower real yields and diminished safe-haven appeal for Gold.
• Federal Reserve officials offer mixed signals, with Governor Bowman ready to hike rates.

Gold erased its earlier gains on Friday after the US Bureau of Labor Statistics (BLS) revealed that Nonfarm Payrolls for April missed estimates, depicting a cooling jobs market. On the release, the golden metal edged toward its daily high of $2,310 but failed to crack May 2’s high of $2,326, exacerbating a retracement to current spot prices.

The XAU/USD trades beneath the $2,300 figure, down by 0.24%. Wall Street portrays an optimistic mood, which is weighing on the safe-haven appeal of the non-yielding metal. Of note, US Treasury yields are sliding, with the 10-year benchmark note down seven basis points. US real yields which correlate inversely to Gold prices, fall six and a half basis points, from 2.219% to 2.146%.

A US  “goldilocks” scenario looms following the US NFP report, as the Institute for Supply Management (ISM) showed that business activity in the services sector contracted for the first time since December 2022.

Elsewhere, a slew of Federal Reserve officials has crossed the newswires. Fed Governor Bowman was hawkish in an interview with Bloomberg Television, saying that she’s willing to hike rates if inflation stalls or reverses. Recently, Chicago Fed Austan Goolsbee added that the latest US employment report was solid, emphasizing that current monetary policy is restrictive.

Daily digest market movers: Gold dwindles around $2,300 amid falling US yields. offered US Dollar

• Gold prices remain underpinned by lower US Treasury yields and a softer US Dollar. The US 10-year Treasury note is yielding 4.506%, down seven basis points (bps) from its opening level. The US Dollar Index (DXY), which tracks the Greenback’s performance against six other currencies, edged down 0.29% and is at 105.04.
• April US Nonfarm Payrolls revealed by the Department of Labor, showed the economy added just 175,000 jobs below forecasts of 240,000 and March upward revised 315,000.
• Additional data revealed that the Unemployment Rate increased slightly from 3.8% to 3.9%. Furthermore, Average Hourly Earnings (AHE) grew by only 0.2%, falling short of the expected 0.3%.
• The ISM April Services PMI fell below the critical 50.0 mark, indicating contraction, with a reading of 49.4, which was lower than expected and below the figure for March. A detailed look into the report reveals a slowdown in the Employment subcomponent, alongside a rise in Prices Paid.
• After the data release, Fed rate cut probabilities increased, with traders expecting 38 basis points of rate cuts toward the end of the year.
• The Federal Reserve’s first-rate cut is seen in September, with odds standing at 87.30% for a 0.25% rate cut. The chances for another quarter of a rate cut in December 2024 stood at 79.01%. This means the federal funds rate would finish the year at the 4.75% - 5.00% range.

Technical analysis: Gold price drops but stays above $2,300

Gold price remains upward biased, though it has remained at around the $2,280-$2,340 range during the week. It should be said that momentum is still favoring a resumption of the uptrend, with the Relative Strength Index (RSI) standing above the 50-midline. Nevertheless, downside risks remain if XAU/USD tumbles below $2,300.

If buyers keep the yellow metal above $2,300, the first resistance would be $2,330. Once cleared, the next stop would be the April 26 high of $2,352, which could open the door to challenging $2,400. Further upside is seen at the April 19 high at $2,417 and the all-time high of $2,431.

Conversely, a bearish continuation looms if Gold sellers drive prices below $2,300, exacerbating a pullback toward the April 23 daily low of $2,291. Subsequent losses are expected, beneath the March 21 daily high, which turned support at $2,223, followed by $2,200.