Gold prices drifted lower on Monday, pulling back from Friday's peak—the highest level seen since 17 June—while staying above key support near $4,300 per troy ounce. A surge in the US dollar, driven by heightened Middle East geopolitical friction and rising crude oil prices, curtailed the precious metal's momentum. The retreat comes despite last week's unexpectedly weak US employment report, which had initially propelled gold upwards.
Weak US labour data initially drives gold gains
On Friday, bullion surged after the release of the US Nonfarm Payrolls (NFP) report showed the US economy unexpectedly shed 23,000 jobs in July. In addition, the prior month's figure was revised downwards from 57,000 to 20,000 added jobs. Signs of a cooling labour market reduced expectations of aggressive monetary tightening by the Federal Reserve, dampening the greenback and boosting appetite for non-interest-bearing bullion. Because gold does not yield interest, lower interest rate expectations reduce the opportunity cost of holding the physical asset relative to yield-bearing investments.
Geopolitical tensions in the Strait of Hormuz restore dollar demand
The initial market response proved short-lived as developments in the Middle East reignited safe-haven demand for the US dollar. Iran reiterated its terms for fully reopening the Strait of Hormuz, demanding an end to the US naval blockade, the removal of economic sanctions, and financial compensation for war damage. Tehran also rejected direct talks with Washington, alleging breaches of an interim peace agreement signed in June.
These geopolitical frictions have pushed crude oil prices higher, stoking market fears that elevated energy costs will reignite inflationary pressures. In response, financial markets continue to price in the possibility that the Federal Reserve could raise interest rates before the end of the year, supporting US Treasury yields and giving a fresh boost to the dollar. Investors are now awaiting Wednesday's publication of US consumer price index (CPI) figures to clarify the trajectory for US inflation and monetary policy.
Technical chart levels around $4,300
From a technical perspective, gold traded above its 38.2% Fibonacci retracement level of the April-to-June price decline, with key support pegged just above the $4,300 threshold. Fibonacci retracement levels are horizontal lines on a price chart that indicate where support or resistance is likely to occur based on mathematical ratios.
While holding above $4,300 retains a degree of short-term buying structure, the metal remains below both its 50% Fibonacci retracement level and its 200-day Simple Moving Average (SMA)—a technical line representing the average closing price over the last 200 trading sessions, often used to determine long-term trend direction. A drop below $4,300 could trigger further technical selling. Buyers and sellers can track real-time moves using the live gold price chart.
Key takeaways
- Gold dropped from its seven-week high of Friday but maintained pivotal technical support above $4,300 per troy ounce.
- Weak US July payroll figures—showing a net loss of 23,000 jobs—initially weakened the dollar and boosted gold.
- Geopolitical tensions involving Iran and the Strait of Hormuz pushed oil prices up, reviving inflation concerns and bolstering the US dollar.
- Traders are waiting for upcoming US inflation data on Wednesday to gauge the Federal Reserve's rate path.
Common questions
Why did gold drop despite poor US employment numbers?
Although weak job figures initially weighed on the dollar and lifted gold, subsequent geopolitical tensions surrounding the Strait of Hormuz pushed oil prices higher. This raised fears of persistent inflation, driving up US Treasury yields and restoring strength to the dollar.
What key support level is the market watching for gold?
Market analysts are closely watching support just above $4,300 per troy ounce, corresponding to the 38.2% Fibonacci retracement level of the April-to-June decline. A sustained move below this level could prompt additional technical selling.
With geopolitical risks keeping energy prices elevated and economic data presenting mixed signals, the short-term outlook for gold remains closely tied to incoming inflation reports and currency movements.