- Gold prices remain supported by rising trade tensions and weakening economic growth prospects which continue to support the demand safe-haven assets.
- ECB cuts interest rates ahead of the upcoming meeting between the German Chancellor and US President Trump which could influence EU-US trade relations.
- US Jobless Claims rise, suggesting that the US labour market is softening ahead of Friday’s key NFP release.
Gold (XAU/USD) prices are steadying after the ECB announced a 25 basis-point (bps) rate cut on Thursday and increase in US Jobless Claims numbers.
After testing the $3,400 psychological earlier in the European session, prices have eased slightly, with prices stabilising above $3,370 at the time of writing.
Meanwhile, geopolitical attention turned to Washington, where German Chancellor Friedrich Merz is set to meet US President Donald Trump to discuss global security and trade. Together, these developments weakened the US Dollar and increased investor demand for safe-haven assets, providing strong fundamental support for Gold.
Gold prices benefit as ECB cuts rates and US Jobless Claims rise ahead of Friday’s NFP report
While the rate decision itself was anticipated, markets closely examined the ECB’s Monetary Policy Statement which was followed by the ECB Press Conference. At the Press Conference, ECB President Christing Lagarde expressed a cautious tone regarding the future trajectory of interest rates, stating that “While Euro area banks remain resilient, broader financial stability risks remain elevated.”
In the US economic data continued to point toward a cooling labor market. Initial Jobless Claims rose to 245,000, surpassing expectations of 235,000. On Friday, the Nonfarm Payroll (NFP) report is expected to show that 130,000 new jobs were added to the US economy in May, down from 177,000 in April with the unemployment rate expected to remain unchanged at 4.2%.
Softer economic conditions, particularly in the US labour market have a direct impact on the Federal Reserve (Fed) monetary policy and interest rate expectation. Although markets are expecting the Fed to cut rates in September, a weakening labour market may push the Fed to reduce rates in July. For non-yielding assets like Gold, lower interest rates provide a positive catalyst for prices.
Gold daily digest: ECB rate decision, trade talks, and US employment data ahead
- The weak ADP employment data released on Wednesday showed that just 37K jobs were added to the US private sector in May.
- Market sentiment remains cautious due to a series of developments, including the US tariff increase on steel and aluminum from 25% to 50%, which took effect on Wednesday. The growing tariff threats and escalating trade tensions have posed a significant risk to risk assets, while a weaker US Dollar has been supportive of Gold prices.
- On Thursday, Reuters reported that Canadian Prime Minister called US tariffs “illegal” while Mexico and the European Union expressed similar frustration.
- On Wednesday, Mexican President Claudia Sheinbaum called the new tariffs “unjust, unsustainable, and without legal grounds,” warning that if a deal is not reached, Mexico will be forced to respond with retaliatory measures.
- Canada and the EU have also threatened to retaliate if no progress is made in trade talks this week.
Gold technical analysis: Bulls retreat from psychological resistance at $3,400
Gold (XAU/USD) is retreating from a strong rally that allowed bulls to retest the $3,400 psychological level during Thursday’s European session.
With prices currently above $3,370, Monday’s high of $3,392 is providing an additional layer of resistance for the short-term move. A move above this level and a break of $3,400 could see a potential move back to the April ATH of $3,500.
However, a move below the $3,350 psychological level and below the 20-day SMA could initiate bearish momentum toward the $3,291, the 23.6% Fibonacci retracement level of the January-April rally.
A daily close below this zone would expose the lower boundary of the triangle near $3,240, and potentially trigger a deeper correction toward the 50% Fibonacci retracement level around $3,057.
Gold daily chart
