Gold prices (XAU/USD) were seen to be stable as of Friday morning after enduring pressure throughout the week following the strengthening US Dollar and market uncertainty ahead of the US Nonfarm Payrolls (NFP) employment report. The market is currently in a cautious mode, affected by the escalating global trade tensions.
Key Drivers of the Gold Market
Trump Launches New Wave of Tariffs
On the August 1 deadline, US President Donald Trump announced a series of new tariffs on various countries:
10% base tariff imposed globally
Tariffs on Canadian goods increased to 35% (from 25%)
39% tariff imposed on goods from Switzerland
Mexico granted a 90-day waiver for renegotiation
The sudden move disrupted investor confidence, thus boosting demand for the US Dollar as a safe haven, ironically, higher than gold itself.
US Dollar Still Strong, Pressure Continues on Gold
The Fed's aggressive tone that kept interest rates unchanged earlier this week continues to support the strength of the US Dollar.
The market currently only gives a less than 50% chance of a rate cut at the September meeting.
The US economic data that remains strong and the Fed's cautious communication remain the main factors limiting the potential recovery in gold prices.
Now Focus on US Labor Market Data
NFP Forecast for tonight:
Job additions are expected to be around +110,000 (compared to +147,000 last month)
The unemployment rate is expected to increase slightly to 4.2% from 4.1%
Potential Market Reaction:
NFP below 100K & unemployment rises → US Dollar weakens, gold has the potential to rise again towards $3,400
NFP above 150K → US Dollar strengthens, gold risks continuing to plunge
Any surprise in this NFP figure is expected to re-adjust interest rate expectations and cause market volatility in the short term.
Fed Statement to Return to Focus
With the end of the blackout period, investors will begin to look to new statements from Fed members for clues on monetary policy after the July pause.
If their tone is more dovish, this could weaken the US Dollar and open up space for gold to recover.
Market Sentiments to Watch
US Jobs Report (NFP) – Tonight – Key catalyst for US Dollar and Gold movement – If reading is weak, rate cut speculation may resurface – If data is strong, US Dollar rally could continue and pressure gold prices
Fed Statement After Meeting – FOMC members return to public stage – Different tones among them could create market uncertainty
US Trade Developments – Focus remains on impact of new tariffs – Any retaliation or additional tensions could revive demand for safe haven assets like gold
Summary
Currently, gold prices are still moving in a consolidation pattern, but the overall market structure remains in bearish mode as long as prices have not managed to break above the crucial $3,340 level.
If tonight’s NFP data records a strong reading, gold could close this week below $3,267, a clear signal that downward pressure may continue towards $3,231 or lower to $3,205.
However, if the jobs report disappoints and the unemployment rate rises more than expected, coupled with a more dovish Fed statement, gold prices could rebound technically.
Regardless, the market is now fully focused on the NFP data due tonight and with the risk of large movements (volatility) expected, traders are advised to be more cautious.
