$4,100 exceeded as gold recovers despite strong US NFP data

$4,100 is back in sight as gold rebounds in early Asian trading on Monday.
Hopes of an end to the Iran war rise after the US midterm elections.
October US NFP growth exceeded expectations.

Gold (XAU/USD) has recovered towards $4,100. The metal regains some losses in early Asian trading on Monday, supported by speculation that incoming Democrats would press for an end to the Iran war.

Having won majorities in both the House and Senate, Democrats appear determined to block US President Donald Trump’s proposed $1.5 trillion defence budget, Bloomberg reported. They strongly oppose the proposal.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Democrats are likely to approve only around $1 trillion in defence spending, according to a source familiar with the discussions. They are keen to avoid being seen as endorsing continued funding for the war against Iran.

Gold’s scope for further gains could be limited, however, if strong US employment figures lift the US Dollar (USD) and Treasury yields. Friday’s report from the US Bureau of Labor Statistics (BLS) showed that the economy created 165,000 jobs in October, up from 60,000 in September and above the 65,000 forecast. October’s Unemployment Rate declined to 4.1% from 4.2% in September.

Expectations that the Federal Reserve (Fed) could maintain higher interest rates for longer strengthened after the above-forecast US payrolls release. Holding non-yielding gold carries a greater opportunity cost when rates are higher, reducing its appeal to investors.

According to the CME FedWatch tool, traders now assign around a 79.6% probability to a December Fed rate rise. That compares with 72.8% before the US employment report.

Independent metals trader Tai Wong described the reaction: "Gold gapped lower on a stellar employment report (that was) strong across the board, but is trying to claw back higher. This is a litmus test for this week's rally," he said.

Gold holds in consolidation as equity selling tests haven demand

A recovery in oil prices and some stability in the Dollar have restrained gold’s upward momentum, according to OCBC analysts. They note that the metal “pared earlier gains after rising to a two-week high above 4140 at one point overnight,” although “softer US Treasury yields continued to lend support.” Their near-term assessment is cautious: “the deepening selloff in AI and semiconductor stocks warrants some near-term caution,” and “should equity weakness trigger broader deleveraging, gold may not be spared from liquidity-driven selling as investors raise cash.”

OCBC nevertheless sees a positive signal, highlighting that “gold’s relative resilience despite the sharp equity selloff is encouraging.” The analysts believe that “following the recent correction and reduction in speculative positioning, gold may be gradually regaining some of its safe-haven appeal, potentially providing shelter amid turbulence elsewhere in financial markets,” while cautioning that “the extent to which gold can hold up if equity weakness persists will be an important test.”

Ahead of the upcoming data releases, OCBC’s view is that “some consolidation remains likely ahead of US payrolls report tonight.” A weaker jobs reading could support the recovery: “softer employment data could further temper Fed tightening expectations, weigh on yields and USD, and allow gold’s recovery to extend,” the analysts argue. They identify “next Tuesday’s US CPI” as “another key test, while oil prices remain an important driver of inflation and rate expectations.” On the technical outlook, they observe that “gold last seen at 4088 levels,” and “daily momentum turned mild bullish but rise in RSI moderated,” concluding that “consolidation [is] likely after the recent sharp rebound.”

Technical Analysis: 100-day SMA keeps gold gains in check

Trading below the 100-day simple moving average (SMA), XAU/USD retains a broadly bearish near-term outlook on the daily chart. A modest cushion above the middle line of the 20-day Bollinger bands points to underlying demand. However, the nearby upper band signals substantial overhead resistance. At 50.30, the Relative Strength Index (RSI) is close to neutral. The latest recovery therefore shows insufficient momentum for a decisive challenge to the prevailing resistance structure.

The 100-day SMA at $4,200 provides the first resistance level, ahead of the upper Bollinger band near $4,225. Bulls would need to regain this zone to reduce the current bearish bias. Initial support lies around the current price area of $4,095. Below that, the middle Bollinger band at $4,065 supports the short-term trading range. A steeper decline would bring the lower band near $3,900 into focus as support, where sellers could turn more cautious.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold: Key questions answered

What attracts investors to Gold?

Widely used to preserve value and facilitate exchange, Gold has occupied an important place throughout human history. Beyond its lustre and use in jewellery, the metal is now widely regarded as a safe-haven asset: an investment considered attractive during periods of turbulence. Its independence from any particular issuer or government also underpins its widespread use as a hedge against inflation and currency depreciation.

Which buyers hold the most Gold?

The largest holders of Gold are central banks. To support their currencies during turbulent periods, they typically diversify reserves and purchase Gold, strengthening perceptions of their economies and currencies. Substantial Gold reserves can bolster confidence in a country’s solvency. World Gold Council data show that central banks expanded their reserves by 1,136 tonnes of Gold, valued at around $70 billion, in 2022. No higher annual purchase has been recorded. Emerging-economy central banks, including those in China, India and Turkey, are rapidly building their Gold holdings.

How does Gold move relative to other assets?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold is inversely correlated with them. A falling Dollar typically supports Gold, giving investors and central banks a way to diversify their holdings during turbulent periods. Risk assets also tend to move in the opposite direction to Gold. Rising stock markets generally pressure the metal’s price, whereas selling in riskier markets tends to support it.

Which factors drive Gold prices?

Many factors influence Gold prices. Its safe-haven role means geopolitical instability or concern over a deep recession can rapidly drive prices higher. Gold pays no yield, so lower interest rates tend to support it, while higher borrowing costs generally weigh on the metal. Nevertheless, because Gold is priced in dollars (XAU/USD), most price movements depend on the performance of the US Dollar (USD). Dollar strength tends to restrain Gold prices; a weaker Dollar is more likely to lift them.