Gold strengthens towards new two-week high, eyes on US NFP data

• Gold prices lure some buyers to new two-week highs in early European trading on Friday.
• Traders prefer to wait for the US NFP report before positioning themselves on the short-term trajectory.
• Fed rate cut bets keep U.S. bond yields and the dollar depressed, providing some support.

The price of gold (XAU/USD) extends the rally and hits new two-week highs on Friday in early trading hours in Europe. Investors are now choosing to sit on the sidelines and wait for the release of closely watched monthly U.S. employment data. The well-known Nonfarm Payrolls (NFP) report will play a key role in influencing future policy decisions by the Federal Reserve (Fed), which, in turn, is expected to provide further momentum to the non-yielding yellow metal.

As key data risk approaches, growing bets on an imminent interest rate cut by the Fed in September, supported by weaker US macroeconomic data, could continue to act as a tailwind for the price of gold. Additionally, the Fed's dovish expectations are keeping U.S. Treasury yields and the U.S. dollar (USD) near multi-week lows, which should further help limit the decline in commodities. Apart from this, geopolitical tensions resulting from conflicts in the Middle East suggest that the path of least resistance for XAU/USD is up.

Daily Digest Market Movers: Gold Price Bulls Turn Cautious Ahead of Key US Jobs Report

• Growing acceptance that the Federal Reserve will begin cutting interest rates later this year, amid signs of a slowdown in the U.S. economy, continues to provide some support for the price of gold, which does not not.
• The U.S. Department of Labor (DoL) reported Thursday that the number of Americans seeking unemployment insurance benefits increased by a more-than-expected 229,000 in the week ending June 1.
• This, along with Wednesday's ADP report on private sector employment, suggests the U.S. labor market is cooling, strengthening bets on a September Fed rate cut and weighing on Treasury yields American.
• The yield on the benchmark 10-year US government bond is stagnating near its lowest level in two months, which in turn appears to be weakening the US dollar and acting as a tailwind for the yellow metal.
• Strong underlying bullish sentiment in global stock markets could prevent traders from positioning for further gains ahead of the release of crucial monthly U.S. jobs details.
• The well-known Nonfarm Payrolls (NFP) report is expected to show that the U.S. economy added 185,000 jobs in May, up from 175,000 and the unemployment rate remained stable at 3.9%.
• Apart from this, the average hourly wage will influence the trajectory of inflation and the future policy decision of the Fed, which, in turn, will help determine the next step in a directional move for XAU/USD.

Technical analysis: Gold price expected to face strong resistance near the $2,400 mark

From a technical perspective, Thursday's sustained move beyond the $2,364 area, or last week's high, was seen as a new trigger for bullish traders. That said, the mixed oscillators on the daily chart warrant some caution before positioning for further gains. Therefore, any further upside is more likely to face strong resistance and remain capped near the $2,400 mark. Some subsequent buying, however, has the potential to push the price of gold up to the next relevant hurdle, near the $2,425 area, en route to the $2,450 region, or the all-time high reached in may.

On the other hand, the $2,060 horizontal zone now appears to be shielding the immediate downside. Any further declines could be seen as a buying opportunity around the $2,340 region. This should help limit gold price declines near the $2,315-$2,314 area or the multi-week low hit on Tuesday. However, a convincing break below will confirm a breakout of the 50-day simple moving average (SMA) and pave the way for deeper losses. XAU/USD may then weaken further below the $2,300 mark and test the $2,280 support zone.