A weak US employment report sends gold prices rebounding! After fading rate hike expectations, weekly bullish candle for the first time in 5 weeks

Gold prices rebound, eyeing a weekly bullish candle for the first time in 5 weeks

Gold prices (XAU/USD) rose toward around $4,170, with a weekly bullish candle in sight for the first time in five weeks.

The biggest factor supporting this rally was that the US employment data significantly underperformed market expectations.

Non-farm payrolls (NFP) rose50,000 versus market expectations of110,000, a large miss.

In response, market participants priced in a later start to further rate hikes by the Federal Reserve (Fed), leading to dollar selling and a drop in the dollar index (DXY) to around 100.76.

For gold, which does not yield interest, a fading rate-hike outlook is a tailwind, and it has rebounded sharply from the about $3,949 multi-month low.

Timing of rate hikes shifted from September to December

Following the US jobs data, expectations for rate hikes also changed.

According to CME FedWatch,

• Probability of a September hike: 63% → 53%
• Probability of a December hike: 76.8%

This shift toward delaying additional hikes supported a rebound in the gold market.

Gold price upside remains limited

However, it cannot yet be said that gold has started a full-fledged uptrend.

While inflationary pressures have eased due to a drop in oil prices, the Fed remains focused on its 2% inflation target and has not abandoned a tightening stance.

Thus, unless the Fed clearly shifts to a more dovish posture, upside potential for gold is limited.

Additionally, if the dollar strengthens again, gold may appear overvalued to foreign investors, potentially weighing on the price.

Central banks’ demand for gold remains robust

There are long-term factors supporting the gold market.

According to the World Gold Council (WGC), central banks purchased41 tons of gold in May.

Further surveys show that

• 89% of central banks expect world gold reserves to increase over the next year
• 45% plan to increase their domestic gold holdings

in response, indicating that steady central bank buying supports gold prices.

Gold price rebounds are underpinned by key levels

Gold price has recovered above the 20-day moving average (about $4,156), with short-term buying continuing to strengthen.

MACD is turning to a buy signal, and RSI has recovered to neutral, suggesting momentum is gradually returning to the upside.

However, the initial strong resistance sits near$4,371, and breaking clearly above this level could open room for further upside.

On the downside, the first support lies near$4,156, with a psychological barrier at$4,000$3,942 as important support zones in view.

Summary

• US employment data greatly miss expectations, while dollar weakens and gold strengthens
• Hike expectations shift from September to December
• Gold rebounds from roughly seven-month lows, eyeing a weekly bullish candle for the first time in five weeks
• Central banks’ demand for gold remains strong, providing long-term support
• Technically, the 20-day moving average is recovered, with $4,371 as the next key upside target