Gold prices surged past $4,300 per troy ounce after an unexpected decline in US nonfarm payrolls sharply reduced expectations of further interest rate increases by the Federal Reserve. Spot gold gained more than 2.3% on Friday to trade around $4,340, securing a weekly advance exceeding 7%. Falling US Treasury yields and a weaker US dollar provided strong tailwinds for non-yielding bullion.
US employment contraction weakens rate hike prospects
Data released on Friday revealed that the US economy shed 23,000 nonfarm payroll jobs in July, significantly missing analyst forecasts for an 80,000 gain. Net revisions to May and June figures further reduced employment estimates by a combined 103,000 positions. Although the unemployment rate edged lower from 4.2% to 4.1%, the report highlighted underlying softness in the US labour market.
Richmond Federal Reserve President Thomas Barkin noted that the employment data was consistent with a labour sector in weak balance, characterising conditions as a low-hire, low-fire environment. Following the publication, money market pricing monitored by Prime Terminal showed the probability of a Fed interest rate increase in September dropping to 30%, down from 58% a day earlier. Swaps markets now assign a 70% probability to the central bank maintaining current borrowing costs.
Yields and US dollar soften alongside geopolitical shifts
Dwindling rate hike expectations reduced demand for fixed-income assets, sending the yield on 10-year US Treasury notes down two basis points to 4.687%. Simultaneously, the US Dollar Index (DXY), which tracks the greenback against six major foreign currencies, fell 0.42% to 99.54. Because bullion is denominated in US dollars, a softer currency lowers effective acquisition costs for foreign buyers checking the live gold price.
Geopolitical news also remained in focus across commodity markets. West Texas Intermediate crude oil held steady near $78 per barrel on the day, though it ended the week down nearly 9.9%. US President Donald Trump expressed optimism regarding a quick resolution to conflict with Iran. However, Iranian officials stated that a proposed maritime deal involving Oman would only create a temporary transit route through the Strait of Hormuz rather than fully reopening the waterway.
Technical landscape and upcoming economic releases
During Friday's session, gold reached an intraday peak of $4,371 per ounce, marking its highest price level since 17 June. Technical indicators point to building momentum after gold breached its 50-day simple moving average at $4,152. Chart resistance is now visible near $4,390, aligned with the 100-day and 200-day simple moving averages, followed by further barriers at $4,450 and $4,500. On the downside, primary support rests at $4,202, followed by $4,152, $4,100, and the August 3 low at $4,019.
Market participants are now turning their attention to upcoming US inflation reports for further clues regarding monetary policy. The July Consumer Price Index (CPI) is scheduled for release on Wednesday, with economists projecting headline inflation to step down to 3.4% year-on-year from 3.5%. The Producer Price Index (PPI) follows on Thursday, offering key inputs for the Fed's preferred inflation gauges.
Key takeaways
- Spot gold rose more than 2.3% on Friday to $4,340, capping a weekly surge exceeding 7%.
- US nonfarm payrolls shrank by 23,000 in July alongside 103,000 in downward revisions for May and June.
- Futures markets reduced the probability of a September Fed rate increase to 30%, down from 58%.
- Yields on 10-year US Treasuries fell to 4.687% while the US Dollar Index dropped 0.42%.
Common questions
Why did the gold price increase following the US jobs report?
Gold rose because an unexpected contraction of 23,000 US jobs in July signaled weakening economic conditions, prompting investors to reduce expectations for Federal Reserve interest rate hikes. This pushed down US Treasury yields and the US dollar, increasing demand for gold.
What are the key technical levels for gold after this rally?
Resistance sits near $4,390 around key moving averages, followed by $4,450 and $4,500. Support levels are identified at $4,202, $4,152 (the 50-day moving average), $4,100, and $4,019.
With US employment figures displaying unexpected weakness, market attention remains firmly focused on upcoming inflation metrics to determine the future trajectory of Federal Reserve interest rates.