Gold prices are seen showing a recovery trend again at the beginning of the week when market sentiment began to change after tensions in the Strait of Hormuz were seen to have eased slightly, while investors are now fully focused on the US primary employment report (NFP) for April to be published at 8.30 pm tonight (Friday).
Gold movements are now focused on geopolitical developments in the Middle East after the administration of US President Donald Trump is reportedly still waiting for an official response from Iran regarding the proposal to reopen the Strait of Hormuz.
Most recently, the West Asian conflict heated up again over the weekend when Iran was accused of attacking three US Navy destroyers sailing in the Strait of Hormuz.
Through social media, he issued a stern warning to Tehran, stressing that the US will not hesitate to act more harshly if Iran continues to delay the peace agreement.
Although the market sees the diplomatic efforts as an important development that needs to be closely monitored, Iran has so far not given any clear commitment to accept the conditions set by Washington.
Tehran also remains steadfast in its stance on the country's nuclear program and has not shown any signs of halting uranium enrichment activities.
US NFP Determines the Real 'Trend Chart'
The main focus of the market this week is on the US NFP report which is expected to determine the next direction for the US dollar and the Federal Reserve's (Fed) monetary policy.
The market had previously expected a modest increase in jobs, but there is an expectation that the actual number could fall lower by around 70,000 jobs.
Pressure on the US labor market is seen increasing due to demographic factors and immigration restrictions that are beginning to limit the country's economic capacity to continue creating jobs at the aggressive pace as before.
This situation has caused the market to begin to question the true strength of the US economy.
Although the unemployment rate was previously seen to be stable at around 4.2%, there is a view that the figure does not reflect the true state of the labor market as many individuals have temporarily stopped looking for work.
What is the Impact on the Market?
Scenario 1: If the NFP data comes out weak and the unemployment rate increases, the market will show weakness for the US dollar and support the price of gold.
The unemployment rate reading of 4.4% is considered quite sensitive as it could increase pressure on the Fed to start considering an early interest rate cut.
Scenario 2: If the US employment data remains strong and exceeds market expectations, the USD has the potential to strengthen again as the Fed will maintain a high interest rate approach for a longer period. This scenario will usually put pressure on the price of gold again in the short term.
Market Technical Structure
XAU/USD seems to be entering a calm phase after experiencing quite aggressive fluctuations before.
Based on observations on the latest chart, the price of gold is seen to be moving in a fairly narrow consolidation zone where it is currently trapped below the dynamic resistance of the Moving Average around the 4,780 to 4,800 level.
Despite attempts by buyers to push prices higher, the lack of strong momentum has caused price movements to remain flat, forming a triangle-like pattern that suggests a major move or breakout is imminent.
From a technical perspective, the RSI indicator around the 52 level shows very neutral market momentum, not too biased towards ‘buy’ or ‘sell’.
This situation reflects the cautious attitude of investors who may be waiting for a new fundamental catalyst before placing larger positions. Looking at the current price structure, the 4,780 level is a major barrier that needs to be broken if gold wants to retest the psychological zone of 5,000.
On the other hand, if selling pressure returns to dominate the market and the price fails to hold above the 4,600 support, investors should be prepared to see a deeper decline towards the 4,300 zone, which is a stronger long-term support.
For now, the direction of gold is more of a “wait and see” as the price is still playing in a small range. A clearer trading opportunity will only emerge when the price successfully breaks out of this consolidation zone in a more tangible direction.
A daily close above 4,800 would favor continued upside, while repeated failures to break above this resistance would only increase the risk of a fall back to the lower support level.
Therefore, tight risk management is essential during this phase of the market to avoid getting caught up in false moves.
