The Gold (XAU) price rose by 0.29% in a rather volatile trading session on Thursday despite an uptick in the US dollar (USD) ahead of today's nonfarm payroll (NFP) report.
Currently, the gold price is less than 1% away from reaching its previous all-time high. The recent rally in bullion began on 26 July primarily due to expectations for an interest rate cut by the Federal Reserve (Fed) in September. Also, global geopolitical instability, specifically in the Middle East, induced safe-haven demand for the metal.
‘At the same time, central bank buying and physical demand in Asia are still subdued, so right now, the gold market is not running on all cylinders, but at some point, we suspect that it will,’ said Bart Melek, head of commodity strategies at TD Securities.
Official data released last week revealed that China's central bank hasn't added to its gold reserves for the second month. ‘Central bank gold demand should stay high in 2024 – 2025 despite the recent absence of "reported" PBOC gold purchases in May and June,’ analysts at Citi wrote in a note.
While the Fed rate cut in September looks granted, the upcoming macro data may still shake investors' expectations. Jerome Powell, the Fed's Chair, has explicitly stated that any rate decision will be data-driven. Therefore, it's highly important to monitor today's NFP report, as it might boost volatility in all USD pairs.
XAU/USD was rising during the Asian and early European trading session. The U.S. NFP report, which is usually one of the most volatile events in the market, will be released at 12:30 p.m. UTC.
Although the headline NFP figure is the most closed-watched metric, traders should also keep an eye on the unemployment rate and the growth in average hourly earnings. Better-than-expected results will have a bullish impact on USD and a bearish impact on XAU.
Given that gold is already near all-time highs, and many investors may be preparing to take some profit on long positions, a bearish impulse from the NFP report may be rather strong. Conversely, if the data is weaker than expected, XAU/USD may continue to rise. Still, breaking above $2,480 may be challenging.
EUR/USD Dropped on Weak Economic Data and Geopolitical Tensions
Yesterday, the euro (EUR) broke below the 1.08000 support level and lost 0.32%.
Meanwhile, the U.S. Dollar Index (DXY) increased on Thursday as the market turned slightly risk-averse following disappointing U.S. economic data and the heating conflict in the Middle East. At the same time, investors also absorbed news of a rate cut by the Bank of England (BOE).
The Federal Reserve (Fed) maintained interest rates at the same level on Wednesday, hinting at the possibility of a reduction in September, while the BOE reduced borrowing costs by 25 basis points.
U.S. unemployment claims unexpectedly rose in the week ending 27 July, reaching their highest level in nearly a year. The ISM Manufacturing Purchasing Managers' Index (PMI) report revealed that manufacturing activity further contracted, dropping to its lowest level since November, with employment in the sector shrinking faster in July.
‘It has been gloomy for two years in the manufacturing sector, but ISM report shows that various measures of activity have sunk to levels not seen since the initial arrival of the pandemic,’ said economists at Wells Fargo.
EUR/USD has been bullish during Asian and early European trading sessions, reaching a 1.08000 resistance level ahead of the U.S. nonfarm payroll (NFP) report. The data is expected to show that employers added 175,000 jobs this month, with the unemployment rate staying steady at 4.1%.
If the data comes out lower than expected, EUR/USD may rise towards the 1.08300 resistance level, while better-than-expected data may expand the bearish trend in the pair.
Bitcoin Holds Support at $64,000
Bitcoin (BTC) fell on Thursday as U.S. stocks declined after weak U.S. jobless claims and ISM Manufacturing PMI data. However, unlike the U.S. stock market, BTC/USD recovered later and finished the day with a 1% gain.
Weak U.S. economic data fueled fears of an economic downturn. On Thursday, reports indicated that U.S. manufacturing activity contracted more than anticipated in July, and employment levels fell to their lowest since 2020.
Additionally, the latest jobless claims increased to 249,000, the highest level in nearly a year. Bitcoin often correlates with the stock market when experiencing a sharp decline. However, fundamentally, BTC appears stronger, and the coin pulls ahead in calm in the stock market.
Bitcoin recently faced resistance at $70,000 and corrected towards around $63,000. On-chain analytics firm CryptoQuant reports a steady rise in Bitcoin outflows from exchanges in recent weeks, a trend typically seen as bullish.
This reduction in exchange supply could drive up Bitcoin's price if demand remains steady or increases. Additionally, the number of new Bitcoin addresses has been rising after hitting multi-year lows in June, indicating renewed interest in the cryptocurrency. This trend coincides with the U.S. national debt surpassing $35 trillion.
Bitcoin has found support at $64,000 and is currently trading within a narrow range in the Asian and early European trading session. Markets today await the U.S. nonfarm payroll (NFP) report at 12:30, which will cause increased volatility and affect the U.S. dollar (USD) and all related pairs.
The latest U.S. macroeconomic data revealed that inflation is slowing, creating room for potential rate cuts by the Fed as early as September. Thus, today's NFP data will be significant as it may support or disprove investors' dovish stance on the U.S. interest rate path.
If the NFP numbers are higher than expected, the U.S. dollar will rise, while BTC may return towards $63,000. Otherwise, BTC/USD may rise towards $66,000.