Gold Nears Seven-Week Highs as US Labor Market Cools

Gold prices are on the rise, reaching levels not seen in nearly seven weeks, trading above $4,350 in early European trading Wednesday. This upward momentum for the precious metal is fueled by indications of a softening, though still resilient, US labor market.

The US employment report for November, a mixed bag overall, has strengthened expectations that the Federal Reserve will implement further interest rate cuts, putting downward pressure on the US Dollar. Gold, which doesn't offer a yield, tends to benefit from lower interest rates because they reduce the opportunity cost of holding it.

While the Fed already lowered rates by 0.25% at its policy meeting last week, its third such cut, opinions are divided among policymakers regarding the need for additional cuts in 2026. The median forecast from Fed officials suggests only one rate reduction next year, but some foresee no further cuts at all. Investors are awaiting speeches from New York Fed President John Williams and Atlanta Fed President Raphael Bostic later today, as any hawkish remarks could boost the dollar and negatively impact the price of gold, which is denominated in US currency.

Looking ahead, the US Consumer Price Index (CPI) for November, due out on Thursday, and Friday's Personal Consumption Expenditures (PCE) Price Index will be closely watched. These inflation reports could significantly influence expectations about future Fed rate cuts.

**Labor Market Data and Economic Indicators**

• The US Bureau of Labor Statistics reported that Nonfarm Payrolls increased by 64,000 in November, a rebound from October's revised decline of 105,000. This figure surpassed market expectations of a 50,000 increase.
• The US Unemployment Rate edged up to 4.6% in November, compared to 4.4% the previous month.
• Average Hourly Earnings saw a modest increase of 0.1% month-over-month in November, following a 0.4% jump the month before.
• Retail Sales in the US remained unexpectedly flat in October, according to the US Census Bureau, after a downwardly revised 0.1% increase in September. This fell short of the 0.1% consensus forecast.

**Other Factors Influencing Gold Prices**

According to the Wall Street Journal, President Donald Trump is expected to interview Fed Governor Christopher Waller on Wednesday as he considers candidates for the next Fed Chair.

Currently, markets are anticipating two rate cuts next year. According to the CME FedWatch tool, Fed funds futures indicate a 75.6% probability that rates will remain unchanged at the Fed's upcoming meeting in January, a rise from nearly 70% a week ago.

Reuters reported on Tuesday that President Trump has ordered a blockade of all sanctioned oil tankers either entering or leaving Venezuela. This action follows the seizure of an oil tanker by US forces near Venezuela last week.

**Technical Outlook for Gold**

Gold is currently trading positively. Analysis of the four-hour chart suggests a continued positive outlook for the metal, with the price receiving solid support above the 100-day Exponential Moving Average. The widening Bollinger Bands and a Relative Strength Index (RSI) above the midline point to near-term bullish momentum.

If XAU/USD can maintain trading above the upper boundary of the Bollinger Band at $4,305, it could be positioned for another attempt to reach the December 15 high of $4,350. A successful break above this level could pave the way for a retest of the all-time high of $4,381.

Conversely, a series of declining prices could signal a bearish trend, with the initial support level to watch being the December 16 low of $4,271. The next key support level lies at the 100-day EMA of $4,220.