Gold Needs Weekly Close Above $4,165 to Sustain Recovery
Gold prices extended their post-US Nonfarm Payrolls (NFP) rally on Friday, climbing to an eight-day high just below the $4,200 mark as the US dollar weakened amid fading expectations of further Federal Reserve interest rate hikes. Despite the rebound, technical indicators continue to favor a "sell-on-rallies" strategy, with bearish momentum and the Death Cross pattern remaining intact.
Spot gold (XAU/USD) traded at $4,182.02 during the European session, supported by broad US dollar weakness. The greenback remained on track for weekly losses as traders scaled back bets on additional Fed tightening following disappointing US employment data and continued selling pressure in the USD/JPY pair.
Gold Technical Outlook Remains Bearish
From a technical perspective, gold's short-term outlook remains negative despite recovering from recent multi-month lows.
XAU/USD continues to trade below its key moving averages, including the 50-day Simple Moving Average (SMA) at $4,402.46, the 200-day SMA at $4,486.06, and the 100-day SMA at $4,636.39. This keeps the broader bearish trend intact even as prices rebound.
The 21-day SMA at $4,165.03 is currently acting as immediate dynamic support. Meanwhile, the 14-day Relative Strength Index (RSI) stands at 47.24, remaining below the neutral 50 level and suggesting that bearish momentum has weakened but has not yet shifted into bullish territory.
Adding to the cautious outlook, the Death Cross remains active after the 50-day SMA crossed below the 200-day SMA during last week's weekly close, reinforcing sellers' control over the longer-term trend.
Key Support and Resistance Levels
On the upside, the first major resistance is located around the 50-day SMA at $4,402.46. Additional resistance levels are seen at the 200-day SMA near $4,486.06 and the 100-day SMA at $4,636.39. This cluster of technical barriers is likely to limit further upside unless gold achieves a decisive breakout.
On the downside, immediate support remains at the 21-day SMA near $4,165.03. A sustained break below this level could expose gold to renewed selling pressure and potentially retest lower price levels. Holding above this support would allow bullion to consolidate while maintaining the broader bearish structure.
Weak US Jobs Data Boosts Gold Demand
Gold buying interest remained resilient after the precious metal rebounded sharply from a seven-month low of $3,942 recorded earlier this week.
The recovery was fueled by continued weakness in the US dollar against major global currencies following disappointing US economic data and easing expectations of additional Federal Reserve rate hikes.
On Thursday, the US Nonfarm Payrolls (NFP) report showed that the economy added only 57,000 jobs in June, significantly below market expectations of 110,000. Meanwhile, the Labor Force Participation Rate declined to 61.5%, its lowest level in more than five years.
The weaker-than-expected labor market data reinforced concerns about slowing economic momentum and encouraged traders to reduce expectations of another Fed rate increase later this year.
According to the CME FedWatch Tool, markets now price in roughly a 54% probability of a September rate hike, down from 66% before the employment report was released.
Softer Fed Outlook Weighs on US Dollar
Additional pressure on the US dollar came from recent comments by Federal Reserve Chair Kevin Warsh, who struck a less hawkish tone during the European Central Bank Forum in Sintra.
Warsh noted that easing inflation expectations were encouraging, reinforcing market hopes that the Fed may avoid further aggressive monetary tightening. Lower interest rate expectations generally benefit non-yielding assets such as gold by reducing the opportunity cost of holding bullion.
The US dollar also remained under pressure due to continued declines in USD/JPY, as investors monitored the possibility of Japanese currency intervention.
Meanwhile, geopolitical developments offered limited support. Qatar stated that US-Iran mediated negotiations had made "positive progress" toward a longer-term agreement, although Iran continued issuing navigation warnings for vessels passing through the Strait of Hormuz.
Gold Awaits Weekly Close Above $4,165
Looking ahead, gold traders will closely watch whether bullion can secure a weekly close above the $4,165 support level, which could strengthen the current recovery.
However, profit-taking ahead of the weekend, reduced liquidity due to the US Independence Day holiday, and the prevailing bearish technical structure could limit additional gains.
Unless gold breaks decisively above major resistance levels, the broader outlook continues to favor cautious trading, with rallies likely to attract fresh selling interest.