- Gold price pauses above $3,340 as markets look ahead to Thursday’s Nonfarm Payrolls (NFP) report.
- President Trump’s tax bill heads to the House of Representatives after passing the Senate on Tuesday. Fiscal concerns support demand for bullion.
- XAU/USD price action stalls below the 20-day simple moving average, providing resistance at $3,350.
Gold (XAU/USD) price is trading in a tight range as traders digest Wednesday’s Automatic Data Processing (ADP) employment data and look ahead to Thursday’s Nonfarm Payroll (NFP) report.
With XAU/USD hovering near $3,340 at the time of writing, US President Trump’s tax bill and interest rate expectations continue to drive demand for bullion.
The ADP Employment Change report for June showed that the private sector contracted in June.
Analysts had expected the June report to show that 95,000 jobs were added to the US private sector in May. Instead, a negative reading of 33K reflects potential weakness in the US labour market.
As a closely watched precursor to the Nonfarm Payrolls (NFP) report, the soft print has provided some support for Gold.
Nonfarm Payrolls on Thursday are expected to decrease to 110,000 in June from 139,000 in May. The Unemployment Rate is expected to rise to 4.3% from 4.2%. Increases in unemployment may raise expectations of interest rate cuts, which are supportive of non-yielding assets, such as Gold.
As the Fed remains committed to monitoring the incoming employment and inflation data before reducing interest rates, this job report may influence the potential trajectory for interest rates.
On Tuesday, Fed Chair Jerome Powell stated at the European Central Bank (ECB) Forum on Central Banking in Sintra that “It’s going to depend on the data, and we are going meeting by meeting.” “I wouldn’t take any meeting off the table or put it directly on the table. It’s going to depend on how the data evolves,” Powell added.
These comments suggest that the Fed is not rushing to cut rates, increasing the potential for a September interest rate cut.
Gold daily digest market movers: XAU/USD trades steady as the House of Representatives votes on Trump’s tax bill
- At the same time, the US President Donald Trump administration’s proposed “Big Beautiful Bill,” with its estimated $3.3 trillion impact on the deficit, passed the Senate.
- The House of Representatives is expected to vote on the bill on Wednesday. The Republican apathy is pushing to pass the bill by Friday, July 4.
- The bill has drawn fire from across the political spectrum, including from Elon Musk and several Democratic leaders, who warn it could lead to inflation and a weaker US Dollar (USD). Such a backdrop often prompts investors to turn to Gold as a hedge against instability and currency depreciation.
- The ISM Manufacturing Purchasing Manufacturing Index (PMI), released on Tuesday, rose to 49 in June, higher than the estimated 48.8.
- Additionally, the Job Opening Labour Survey (JOLTS) report released on Tuesday showed that 7.769 million vacancies in the US were available in the last day of May. This beat the estimate of 7.3 million.
- The ECB Forum on Central Banking continues in Sintra, Portugal. ECB President Christine Lagarde, Bank of Japan (BoJ) Governor Kazuo Ueda, Bank of England Governor Andrew Bailey, and Federal Reserve Chair Jerome Powell are discussing Central Banking policy.
- Inflation and interest rates have remained top priorities in discussions. Comments from the meeting may continue to drive interest rate expectations. Prospects of rate cuts could boost demand for non-yielding assets such as Gold.
- With a July 9 tariff deadline fast approaching, the US is focusing on smaller, step-by-step trade deals rather than sweeping agreements, aiming to avoid triggering new tariffs. While partial progress has been made with countries such as the UK and China, talks with Japan and the European Union remain unsettled. The EU has shown openness to a blanket 10% tariff but is pushing for exceptions in sensitive sectors such as semiconductors and pharmaceuticals.
Gold technical analysis: XAU/USD struggles to clear resistance at the 20-day SMA
Gold is trading near $3,340 at the time of writing, with the 20-day Simple Moving Average (SMA) providing resistance at $3,350.
The 23.6% Fibonacci retracement level of the April low to the April high move provides resistance at $3,371. A move higher and a break of wedge resistance could push XAU/USD to the $3,400 psychological level, opening the door for the June high of $3,452.
Gold (XAU/USD) daily chart
The Relative Strength Index (RSI) is nearing 52 at the time of writing, suggesting that momentum remains close to neutral levels.
On the downside, the 50-day SMA provides near-term support at $3,321. Below that is the round number of $3,300 and the 50% Fibonacci retracement of the April move at $3,229.
A move below could bring the May low of $3,120 mark into play.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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