On September 7th, our previous assessment from last Friday highlighted that weak U.S. ADP employment figures, coupled with dovish remarks from Federal Reserve Governor Waller, had reduced the probability of a September rate hike from 66% to 50%. This pressured the dollar to a one-week low, supporting a rebound in gold from its recent monthly trough. With non-farm payroll data looming, gold traded sideways as markets awaited directional cues. Our recommended strategy was to monitor resistance at $4,510, with a breakout targeting $4,570, while support was seen at $4,460, with a downside break eyeing $4,400.
Subsequent price action showed gold consolidating within a $4,460 to $4,490 range during Friday's European session. Upon the release of the non-farm payrolls report during U.S. trading, gold broke lower, plunging nearly $80 in a sudden selloff to hit an intraday low of $4,365. It rebounded to encounter resistance at $4,449 before stabilizing above $4,400 into the close. This Monday, gold resumed its downward drift, finding support at $4,385, and is currently trading around $4,404.
Overall, the stronger-than-expected jobs report triggered a downside breakout, with gold reaching our projected support target of $4,400, and short-term momentum remains weak with a bearish bias. According to a Wolfinance senior analyst, the disappointing ADP data initially nudged September hike odds from 66% down to 62%. The following day, Governor Waller's dovish stance, explicitly stating a preference to hold rates steady in September if August inflation data indicates easing price pressures, further reduced expectations to 50%. This weakened the dollar to a fresh one-week low, aiding gold's recovery from its one-month bottom. However, Friday's non-farm payrolls report surprised to the upside, showing 162,000 new jobs added, vastly exceeding the expected 56,000. This reinforced the case for another rate increase. Additionally, hawkish comments from Fed official Hammack, hinting at further tightening, lifted hike probabilities to nearly 60%, exerting downward pressure on gold prices.
Looking ahead, the upcoming U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) data this week will be pivotal in shaping the September rate decision. Should inflation readings come in below expectations, it could dampen rate hike speculation once again. On the daily chart, gold's rebound from monthly lows stalled after setting a one-week high, and it now appears to be trading in a consolidative, sideways pattern.
Key support levels to watch are last Friday's low at $4,365, followed by the weekly Bollinger Band midpoint at $4,335, which also aligns with the current 4-hour lower Bollinger Band. On the upside, immediate resistance is seen at the intraday high of $4,435, with further resistance at the $4,460 level, which marked the downside trigger point on Friday. The 5-day moving average is turning lower in a bearish crossover, while the MACD indicator shows a negative crossover. Additionally, the KDJ and RSI indicators have rolled over to point lower again, suggesting that gold faces a risk of further declines after its rebound stalled.
For today's trading, the robust non-farm payrolls data and hawkish Fed commentary have raised the likelihood of a September rate hike, which is weighing on bullion. Our recommended approach is to maintain a range-bound trading strategy, with resistance identified at $4,435 and $4,460, and support at $4,365 and $4,335.
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