Gold prices retraced some of their Monday gains, falling by over 0.80% on Tuesday as the US Dollar strengthened, driven by strong labor market data. The XAU/USD traded around $3,348 after peaking at $3,392 earlier in the day.
US Labor Market Data Weighs on Gold
Investor sentiment turned optimistic following the release of the latest Job Openings & Labor Turnover Survey (JOLTS), which showed a sharp rise in job vacancies in April. The number of job openings surged to 7.39 million, up from 7.2 million in March and significantly ahead of the market expectation of 7.1 million.
This upbeat labor data indicates that the US labor market remains tight, which could imply a delay in the Federal Reserve’s anticipated rate cuts. As a result, bullion prices retreated due to the stronger USD, and investors turned their attention to upcoming US jobs data, including the ADP National Employment Change report for May and the Nonfarm Payrolls (NFP) data scheduled for release on Friday.
US-China Trade Tensions and its Impact on Gold
The US Dollar’s strength was compounded by trade tensions between the US and China. Rumors of a potential call between US President Donald Trump and Chinese President Xi Jinping contributed to uncertainty in the markets. Trump announced that China had violated a recent trade agreement, and he imposed a doubling of tariffs on steel and aluminum imports from 25% to 50%, effective June 4.
While the European Commission pressured the US to lower tariffs, the Trump administration has pushed for revised offers from its trading partners by Wednesday. These trade uncertainties are likely to keep gold prices volatile, with the precious metal often acting as a safe-haven asset amid geopolitical tensions.
US Dollar Rises, Pressuring Gold
The US Dollar saw a strong recovery as it gained 0.52%, pushing the Dollar Index (DXY) to 99.22. Additionally, US Treasury bond yields continued to rise, with the 10-year Treasury note up by 2 basis points to 4.462%. Real yields also climbed, exerting further downward pressure on gold.
The increase in US JOLTS data has reinforced the view that the US economy is still resilient, likely complicating the outlook for Fed rate cuts. However, money markets suggest that traders are pricing in 48.5 basis points of easing by the end of the year, according to Prime Market Terminal data.
Gold Price Outlook: Bulls Eyeing $3,400 Resistance
Despite the recent pullback, the uptrend in gold remains intact, and the ongoing dip presents a potential buying opportunity for traders looking to target $3,400. If the $3,400 level is surpassed, it would open the way for further gains toward key resistance levels.
The first support level to watch is the May 7 peak at $3,438, followed by the psychological $3,450 level. Beyond that, the all-time high (ATH) at $3,500 remains a key target for bullish traders.
On the flip side, if gold prices fall below $3,300, the downside risk increases, with potential support levels at the 50-day Simple Moving Average (SMA) around $3,235 and the April 3 high at $3,167.
Summary
Gold’s price action remains highly sensitive to both economic data and geopolitical risks. While upbeat US labor market data has bolstered the US Dollar, reducing demand for gold, the ongoing US-China trade tensions and potential shifts in Fed policy continue to create a volatile environment for the precious metal. Investors are closely watching the ADP employment data and Nonfarm Payrolls this week for further cues on the Fed’s next moves.
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