07 May, 2024

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Last Friday’s weaker-than-expected NFPs gave gold a boost on renewed US rate cut expectations. Further gains may depend on the outcome of ongoing Israel-Iran peace talks.

• Gold has found solid short-term support around $2,280/oz.
• Israel-Iran ceasefire talks continue and may cap the precious metal.

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US interest rate cut expectations were boosted at the end of last week after the latest US Jobs Report showed the labor market starting to weaken. The report showed just 175k new jobs added in April, missing expectations of 243k and sharply lower than the 315k jobs created in March. The unemployment rate also ticked up by 0.1% to 3.9%. Financial markets are now pricing in a 25 basis point rate cut in September and a further quarter-point cut by the end of the year.

US Dollar Slumps After NFPs Miss Expectations, US Equities Bid

While the interest rate backdrop is giving gold a boost, further upside may be capped depending on the outcome of ongoing peace talks in Cairo. According to BBC media reports, Hamas has accepted ceasefire terms suggested by Egyptian and Qatari mediators but Israel has pushed back on the proposal saying that it is ‘far from Israel’s basic requirements’. Talks are ongoing despite military action by Israel on Hamas targets in Rafah. If Israel and Iran can find common ground, the recent safety bid underpinning gold’s move higher will begin to be priced out, weighing on the precious metal.

Gold has broken out of a Bearish Flag formation but refuses to move lower, leaving this technical setup at risk. The precious metal has found short-term support at around $2,280/oz. with this level holding four tests last week. Short-term resistance will likely kick in between $2,335/oz. and $2,340/oz. The outcome of talks in the Middle East will set the next move in gold.

Gold Daily Price Chart

Charts via TradingView

IG Retail Trader data show 55.20% of traders are net-long with the ratio of traders long to short at 1.23 to 1.The number of traders net-long is 5.66% higher than yesterday and 1.99% higher than last week, while the number of traders net-short is 7.22% higher than yesterday and 3.53% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall.

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