Gold Buyers Aim to Break Key Resistance Amid Cooling U.S. Labor Market

Market Overview

Gold is trading near $2,500 per ounce on Thursday as investors anticipate the release of key U.S. employment figures. These reports could provide further insight into the Federal Reserve’s potential rate cuts, which may reduce the opportunity cost of holding non-yielding assets like gold.

On Wednesday, the JOLTS report revealed a larger-than-expected drop in job openings, hitting the lowest level since 2021. This data heightened expectations of a weakening labor market and increased speculation for a significant 50 basis point rate cut by the Federal Reserve this month.

Additionally, the sharp decline in the ISM PMI for U.S. manufacturing activity has raised doubts about the resilience of the U.S. economy amid higher rates. These factors have put pressure on the U.S. dollar and boosted demand for alternative assets, including gold.

Technical Analysis

On the four-hour chart, gold has been trading in an upward trajectory after buyers defended the $2,471.86 support level for the third time. This solid support prompted a rebound, with gold breaking above the $2,496.89 resistance and reaching the immediate resistance level at $2,503.61, near the psychological $2,500 mark. If buyers successfully break through this resistance, the price could rise further to $2,513.82 and $2,521.78. Sustained bullish momentum above these levels could bring $2,538.78 into focus for buyers.

Oscillator Confirmations

RSI (Relative Strength Index): The RSI is moving higher towards the overbought territory, signaling strong bullish momentum. This suggests that buyers are gaining control and may continue pushing prices upwards unless the RSI reverses sharply.

MACD (Moving Average Convergence Divergence): The MACD shows shrinking negative histogram bars above the signal line, indicating a reduction in bearish momentum. This convergence suggests a potential shift towards a more bullish outlook if buyers continue to dominate.

Moving Averages: The price is currently above both the 34-period and 100-period moving averages, reinforcing the bullish trend. This alignment of moving averages supports the ongoing upward momentum in gold.

Alternative Scenario

Alternatively, if sellers manage to push the price below the 34-period moving average around $2,496.89, further declines could test supports at $2,487.29 and $2,471.86. A break below the key support at $2,471.86 would signal a potential shift to a bearish trend.

Key Levels

• Resistance Levels:
  • Resistance 3: 2538.78
  • Resistance 2: 2521.78
  • Resistance 1: 2513.82
• Current Price: 2504.06
• Support Levels:
  • Support 1: 2496.89
  • Support 2: 2487.29
  • Support 3: 2471.86

Key Events to Watch

Thursday is a busy day for gold traders. The weekly jobless claims and ADP employment report are due for release and could confirm signs of a cooling labor market. Investors will also focus on the Purchasing Managers’ Index (PMI) for the services and non-manufacturing sectors, which could provide fresh insights into the U.S. economic trajectory.

Conclusion

Gold is currently in an upward trend, driven by expectations of a softer U.S. labor market and potential rate cuts from the Federal Reserve. Technical indicators align with this bullish outlook, pointing to further gains if key resistance levels are broken. However, economic data releases later today could introduce volatility and either strengthen or challenge the current trend. Traders should remain vigilant as market sentiment can shift rapidly in response to new economic insights.

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