Gold rebounds above $4,020 as dollar weakens and US jobs data fuels Fed rate expectations
Gold rose above $4,020 in Asian trading, supported by a softer dollar and speculation that the incoming Democratic Congress will seek a lower defense budget, while strong US payrolls data lifted expectations of further Fed tightening.
Gold price (XAU/USD) climbed back above $4,020 during Asian trading on Monday, helped by a weaker US dollar and market speculation that the newly elected Democratic majority in Congress will push for a reduced defense budget. Bloomberg reported that Democrats, who now control both the House and Senate, are opposing President Donald Trump’s proposed $1.5 trillion defense budget and are likely to approve a figure near $1 trillion, aiming to avoid further funding for the conflict with Iran.
The rally could face limits, however, as robust US employment data may strengthen the dollar and pressure gold, which does not yield interest. The US Bureau of Labor Statistics said the economy added 165,000 jobs in October, well above the 65,000 forecast, and the unemployment rate fell to 4.1%. The stronger payrolls report increased market expectations that the Federal Reserve will keep rates higher for longer, with the CME FedWatch tool showing a 79.6% probability of a December rate hike, up from 72.8% before the data.
"Gold gapped lower on a stellar employment report (that was) strong across the board, but is trying to claw back higher. This is a litmus test for this week's rally," independent metals trader Tai Wong said.
Analysts at OCBC noted that gold trimmed earlier gains after briefly reaching a two-week high above $4,140, with rising oil prices and a steadier dollar limiting further upside. They said softer US Treasury yields continue to support gold, but warned that a broader equity sell-off could trigger liquidity-driven selling of the metal. OCBC highlighted gold’s resilience amid the equity decline and suggested that, after recent corrections, the metal may be regaining some safe-haven appeal, though its performance will be tested if equity weakness persists.
Looking ahead, OCBC expects further consolidation ahead of the upcoming US payrolls report, noting that softer employment data could ease Fed tightening expectations and support gold. The next US CPI release on Tuesday is flagged as another key test, while oil prices remain an important factor for inflation and rate outlooks.
Technical analysis shows spot gold still below its 100-day simple moving average, with price just above the 20-day Bollinger middle band and a neutral RSI around 50.30, indicating limited momentum. Immediate resistance lies near $4,200, with the upper Bollinger band around $4,225, while support is found near $4,095, and a deeper decline could test the $3,900 level.