Gold price tumbles after hitting two-week high amid Fed rate cut speculation

• Gold price drops to $2,420 after peaking at $2,477, down nearly 0.80%.
• US Nonfarm Payrolls for July miss expectations, unemployment rate rises to 4.3%.
• Treasury yields and USD plunge, prompting banks to anticipate faster Fed rate cuts.

Gold price reversed its course and tumbled almost 1% after hitting a two-week high of $2477 following weaker-than-expected data from the United States (US). This weighed on the Greenback and sent US Treasury yields plummeting as investors expected the Federal Reserve could cut rates faster than they thought. The XAU/USD trades at $2,420 at the time of writing

XAU/USD whipsaws as disappointing US economic indicators weigh on the Greenback and Treasury yields

Friday’s US Nonfarm Payrolls figures disappointed investors, which were still digesting a dismal ISM Manufacturing PMI report that spurred concerns about the health of the US economy.

The US Department of Labor revealed that 114K people were added to the workforce in July, missing estimates of 175K, and the previous figures were downward revised from 206K to 179K. Further data showed the Unemployment Rate ticked up from 4.1% to 4.3% and Average Hourly Earnings dipped a tenth from 0.3% to 0.2%.

Bullion rallied sharply, capitalizing on the fall of the US 10-year Treasury bond yield, which tanked over 15 basis points to 3.815%. The Greenback was also hurt, collapsing more than 1.13% according to the US Dollar Index (DXY), which is at 103.16.

After the data, most banks began to price in more aggressive monetary policy easing by the Fed. Bank of America expects the first cut in September instead of December, while Citi and JP Morgan expect the Fed to lower rates by 50 bps in September and November.

XAU/USD Price Analysis: Technical outlook

Gold price has retreated toward the July 31 lows of $2,404-$2,410, which could be attributed to profit-taking ahead of the weekend, as US yields and the Greenback remain at weekly lows. From a technical standpoint, XAU/USD is set to remain bullish and if buyers achieve a daily close above $2,450, this could exacerbate a challenge towards the all-time high, ahead of the $2,500 mark. On further weakness, prices could fall below $2,400, which could pave the way for a pullback to the 50-day moving average (DMA) at $2,364, before testing the 100-DMA at $2,337.