Gold Prices Fall Amid US Jobs Report, Upside Potential Remains
The ongoing global economic uncertainty, combined with a weakening US dollar and low interest rates, is expected to drive gold prices higher in the coming months, with the metal's upside potential remaining intact despite the recent decline.
Gold prices dropped on Friday, extending losses for the second consecutive day, but still managed to hold onto weekly gains above 1.30%, as a solid US jobs report boosted the US dollar and treasury yields, making gold less attractive.
The metal reached a new near-term trend high of $3,403 before sellers took control, resulting in an outside day showing short-term uncertainty. However, support around a top declining trendline was retained, and the larger developing bullish pattern continues to dominate. If gold stays above the trendline, the bullish outlook is retained, with a short rising internal trendline connecting the recent interim swing low gaining significance and representing potential support.
The decline was triggered by a solid US jobs report, which showed 139,000 new jobs were added in May, and an unchanged unemployment rate of 4.2%. This led to a boost in the US dollar and treasury yields, making gold less attractive. The XAU/USD price fell 0.84% to $3,322, but is poised to finish the week with gains. The Fed cut expectations have faded as traders reassess the outlook ahead of the June 17-18 FOMC meeting.
Other factors, such as heightened tensions between Russia and Ukraine, and the conflict between Israel and Hamas, could still drive gold prices higher. Next week, the US economic docket will be absent of Fed speakers, and traders will be eyeing Consumer Price Index (CPI) figures, Producer Price Index (PPI), and University of Michigan Consumer Sentiment. Experts believe that the metal's price could continue to rise in the coming months, driven by a combination of factors including a weakening US dollar, low interest rates, and ongoing global economic uncertainty.
The price of gold has been hovering around $3,400, unable to break through this level despite strong demand and limited supply. Analysts say the metal's upside potential remains, with the rising ABCD pattern completing nearby at $3,491, representing an initial upside target zone for gold.