Gold Edges Higher as Softer Dollar Caps Fed Pressure

Key Moments

Gold Buoyed by Softer Dollar and Data Pockets

Gold (XAU/USD) advanced to a new intraday high heading into the European session on Thursday, extending a two-day upward move as the US Dollar (USD) eased slightly. The metal climbed steadily during the morning, supported by modest USD weakness, but remained confined within the broader trading band established in the prior session as investors avoided large directional positions.

Market participants showed caution ahead of the widely watched US monthly labor market report, choosing to wait for clarity from the upcoming Nonfarm Payrolls (NFP) figures before committing to stronger bullish or bearish stances in gold.

US Data Mix Triggers Dollar Selling, Supports Bullion

Automatic Data Processing (ADP) reported on Wednesday that US private sector employment increased by 98K in June, down from an unrevised 122K in the previous month and below consensus expectations of 113K. At the same time, the Institute for Supply Management’s (ISM) Manufacturing PMI slipped from 54 to 53.3 in June.

Within the ISM report, the Prices Paid Index declined to 73 from 82.1, while the Employment Index edged higher to 49.7 from 48.6 in May. Alongside these data points, a pronounced drop in Crude Oil prices has significantly cooled near-term inflation concerns. This combination has encouraged some selling of the US Dollar, which in turn has provided a supportive backdrop for gold prices.

Firm Fed Hike Expectations Cap Dollar Losses and Gold Upside

Despite the recent data and softer inflation signals, interest-rate expectations remained firmly tilted toward further tightening. According to the CME Group’s FedWatch Tool, traders continued to assign roughly a 64% probability that the Federal Reserve will raise rates in September, with nearly an 85% chance of at least one hike by the end of this year.

These expectations were reinforced by remarks from Fed Chair Kevin Warsh on Wednesday, who stated that he will maintain the 2% inflation target and “disappoint anyone who expects loose monetary policy” despite ​President Donald Trump’s call for rate cuts. In addition, several other Fed officials have signaled that higher rates may be required to guide inflation back to the 2% objective.

This policy stance has tempered the downside in the US Dollar and constrained the appeal of non-yielding assets such as gold, limiting the metal’s ability to extend gains despite the short-term lift from softer data and lower oil prices.

Geopolitical Tensions Keep Risk Premium Alive

On the geopolitical front, Iran and the US concluded another round of indirect negotiations in Qatar without any indication of significant progress toward a durable resolution of tensions surrounding the key Strait of Hormuz. Separately, Russia launched a barrage of missiles and drones at Ukraine’s capital, Kyiv, early Thursday.

These developments kept geopolitical risk elevated and continued to support safe-haven demand for the US Dollar. With attention firmly on the upcoming US NFP release later in the North American session, the labor market data remained central to shaping expectations for Federal Reserve policy, the trajectory of the USD, and, by extension, the near-term path for gold prices.

Technical Picture: Recovery Attempts Meet Layered Resistance

From a technical standpoint, the prior overnight short-covering move stalled near the 38.2% Fibonacci retracement of the recent two-week decline. The XAU/USD pair also continued to trade below the 100-period Simple Moving Average (SMA) on the 4-hour chart, underscoring a still-bearish near-term structure and suggesting that rallies may remain vulnerable.

Nevertheless, momentum indicators have shown signs of improvement. The Moving Average Convergence Divergence (MACD) has turned higher above the zero line, while the Relative Strength Index (RSI) is hovering near 54. In addition, the pair’s acceptance above the 23.6% Fibonacci retracement supports the case for further attempts at a corrective rebound, although these efforts are still constrained by the existing bearish pattern.

Key Technical Levels for XAU/USD

Immediate resistance and support zones are clustered around Fibonacci retracement levels and the 100-period SMA, defining a structured trading range for XAU/USD.

On the upside, the immediate hurdle is located at the 38.2% retracement at $4,112.32, followed by the 100-period SMA at $4,145.47 and the 50% retracement level at $4,164.62. Above these, successive resistance zones are aligned at the 61.8% Fibonacci level at $4,216.91, the 78.6% retracement at $4,291.37, and the cycle peak at $4,386.20.

On the downside, initial support is identified at the reclaimed 23.6% retracement at $4,047.62. A more pronounced decline would put focus on the structural base around the recent swing low at $3,943.03, which represents a critical floor for the current bearish structure.