Gold (XAU/USD) retreated slightly after establishing a fresh record high above $2,300 during Thursday’s early New York session. The precious metal benefits from a softer US Dollar, pressured by a disappointing US ISM Services PMI report.
US Dollar Weakness and Market Sentiment
The US Dollar Index (DXY) extended its decline to 104.00, while 10-year US Treasury yields dipped to 4.34% amid an improved market mood. Although expectations for a June Fed rate cut have moderated slightly, the CME FedWatch tool still shows a 58% probability of a rate cut compared to 70% last week. Friday’s highly anticipated US Nonfarm Payrolls (NFP) report will likely influence market sentiment and expectations.
NFP Report: Key for Gold Outlook
Economists anticipate the US NFP report to show 200K new jobs added in March, down from February’s 275K. The Unemployment Rate is expected to hold steady at 3.9%. Average Hourly Earnings, a key inflation gauge, are forecast to rise at a slower 4.1% YoY, down from 4.3% in February.
Robust wage growth and labor demand could further reduce hopes of a June Fed rate cut, while a softening labor market could boost rate cut expectations. The latter scenario would likely weigh on US yields and support further gains for Gold.
Technical Outlook: Gold Tests $2,300
Gold continues to test record highs, supported by various factors. However, some overbought signals suggest a potential short-term correction. The 14-period Relative Strength Index (RSI) hovers near 80.00, indicating the potential for a pullback.
The near-term bullish bias remains strong, with the RSI consistently holding in the 60.00-80.00 range for over a month. All short-to-long-term Exponential Moving Averages (EMAs) are trending upwards, further confirming the bullish outlook. Key support lies at $2,223, the March 21st high.