Gold Prices Decline as Strong US Jobs Data Bolsters Dollar
Gold prices are down following stronger-than-expected US job growth, which has strengthened the US Dollar. Despite the decline, gold is on track to end a three-week losing streak.
Gold (XAU/USD) is experiencing a decline as stronger-than-expected US Nonfarm Payrolls (NFP) data supports the US Dollar (USD). Currently, XAU/USD is trading around $4,050, down 1.20% for the day after reaching a two-week high of $4,146 on Thursday.
The US economy added 165,000 jobs in October, significantly exceeding the forecast of 65,000, while September’s figures were revised upward to 60,000 from 29,000. The unemployment rate decreased to 4.1% from 4.2%. These robust hiring figures indicate a resilient labor market, potentially giving the Federal Reserve more leeway to combat inflation and strengthening the case for an interest rate hike in December. Higher interest rates tend to make interest-bearing assets more attractive, which negatively impacts gold, as it does not yield any interest.
The US Dollar Index (DXY), which measures the dollar against a basket of six major currencies, is trading around 102.22, up 0.62% on the day. US Treasury yields have also rebounded, with the benchmark 10-year yield increasing by 4 basis points to 4.88%.
Additionally, a sell-off in equities driven by artificial intelligence developments has left gold vulnerable to liquidity-driven selling, as investors may need to liquidate positions to raise cash or cover losses.
Despite these pressures, gold is poised to break a three-week losing streak, aided by a significant drop in oil prices. West Texas Intermediate (WTI) crude oil has fallen approximately 12% this week, partly due to expectations that a Democratic Congress may limit President Donald Trump's military actions against Iran. However, a negotiated resolution to the US-Iran conflict still seems unlikely, despite ongoing diplomatic efforts. President Trump indicated that the US may need to take further action against Iran, stating that people will "know soon enough" about potential decisions.
Technical analysis shows that XAU/USD remains above both the 50-period and 100-period Simple Moving Averages (SMAs), suggesting a constructive near-term outlook, although it is capped by the 200-period SMA. The Relative Strength Index has eased from overbought levels, indicating a cooling bullish momentum. Immediate resistance is noted at the 200-period SMA, while initial support is found at the 100-period SMA.