Gold rallies as mediocre US NFP crushes Fed rate hike bets

Gold prices soared dramatically on Friday, soaring nearly 2.3% within a single day and a staggering 7% over the course of a week. This surge followed a disappointing US Nonfarm Payrolls report, which revealed a loss of 23,000 jobs, falling short of the anticipated 80,000 job gain. The May and June job figures were also revised downward, resulting in a total reduction of 103,000 workers.

Despite this, the Unemployment Rate dropped slightly, from 4.2% to 4.1%. The release of the US jobs data dampened expectations of a Federal Reserve rate hike to combat inflation, leading to a decline in US Treasury yields and the US Dollar Index. Richmond Fed President Thomas Barkin noted that the jobs data indicated a weak labor market, with an emphasis on a "low hire, low fire" scenario.

Geopolitical factors, including potential negotiations regarding the Strait of Hormuz, added to the market's optimism. West Texas Intermediate (WTI) oil prices remained relatively stable around $78 per barrel, yet declined almost 9.9% over the past week. Traders closely monitored the upcoming release of the US Consumer Price Index (CPI) and Producer Price Index (PPI) for July, anticipating modest decreases in inflation rates.

Gold prices appeared positioned to become bullish as they surpassed the 50-day Simple Moving Average (SMA) at $4,152 and approached the 100-day SMA at $4,390. The Relative Strength Index (RSI) indicated a bullish trend, with the likelihood of further upward movement. Gold's next major resistance level was the 200-day SMA at $4,390, followed by $4,450 and $4,500.

Conversely, the first support level for gold was the July 6 high, now functioning as support at $4,202. If this level broke, subsequent targets would be the 50-day SMA at $4,152 and $4,100, with the August 3 low of $4,019 as an additional support point. Gold has historical significance as a store of value and medium of exchange, often regarded as a safe-haven asset during turbulent times.

Central banks are the largest holders of gold, using it to stabilize their currencies in uncertain situations. The inverse correlation between gold and US Dollar and US Treasuries explains the yellow metal's price movements during periods of geopolitical instability or recession fears.