Gold likely to remain firm; near-term support at $3,500, other levels here

Gold outlook: As the Fed Chair Powell's focus has shifted from inflation to the weakening US job market, the US monthly job report will be critical for gold for short-term trading.

Gold – Slightly lower ahead of the US job report as Dollar firms up

Performance:

Spot gold, after hitting a fresh record high of $57,851 on September 3, retreated on Thursday on mixed US economic data and a slightly firmer US Dollar. Gold fell after rallying for seven consecutive days. 

At the time of writing, the yellow metal was changing hands at $3,552, down by nearly 0.15 per cent for the day, while the MCX October gold contract at Rs 106,685 was down by 0.50 per cent.

 

Data roundup:

US data released on September 4 were largely mixed. ADP employment change (August) at 54K Vs the forecast of 68K was disappointing, while ISM Services Index recovered strongly from 50.10 in July to 52, fastest expansion since February as new orders surged the most since October 2024, though employment contracted for the third straight month. 

 

Initial jobless claims rose to 237K, a two-month high and were higher than the median forecast of 230K as hiring plans fell to the weakest level for any August on record. Continuing claims edged lower by 4K to 1.94 million in the week ending August 23.

Q2 unit labour cost was revised lower from 1.2 per cent to 1 per cent in its final reading as nonfarm productivity rose the most since December 2023. 

Bank of America noted that in a major shift from the decade's trend, the unemployment rate for recent college graduates in the US has now surpassed that of all workers due to macroeconomic headwinds, which include trade tensions and rapid pace of automation. The US trade deficit in July surged 32.50 per cent to $78.30 billion in July, the widest deficit in four months.  ALSO READ | Three reasons why Gold prices may hit ₹1.4-lakh mark sooner than you think

Trade and tariff:

The US Administration asked the US Supreme Court to take up the tariff case by September with arguments in early November so that the Court may deliver its ruling by the end of the year.

 

US Dollar Index and yields:

The US Dollar Index rose by 0.20 per cent to 98.33. Ten-year US yields fell by 0.87 per cent to 4.18 per cent on rate cut expectations ahead of the crucial US monthly job report, while 2-year yields fell 2 bps to 3.59 per cent, lowest since May 1. Thirty-year bonds at 4.87 per cent were down 2 bps.

 

Gold ETF and COMEX inventory:

As of September 3, total known global gold ETF holdings stood at 93.72 MOz, highest level since June 2023 and up 13.12 per cent YTD. The all-time high gold ETF holding level is 111.25 MOz, reached during Covid period in 2020. Bloomberg reported that State Street's SPDR Gold Shares took in $2.4 trillion last week -- the most cash out of any US-listed ETF on safe haven demand as prices surge. 

SPDR Gold Shares and iShares Gold Trust, the two biggest gold-backed ETFs, have increased by more than 5 per cent in the past five days.

  Registered COMEX warehouse gold inventory at 39.95 MOz is down by 13.57 per cent from the record high level of 45.07 MOz reached on April 4.

 

World Gold Council proposes global gold market overhaul:

The WGC and law firms Linklaters and Hilltop Walk Consulting have proposed a plan to overhaul the global gold market through a Wholesale Digital Gold ecosystem aiming to improve the ownership, trading, and utilisation of gold.

 

Fed Watch:

Federal Reserve Board of Governors nominee Stephen Miran, in his testimony for nomination to the Federal Reserve Board of Governors before Senate Banking Committee on Thursday, said that if confirmed he would preserve the independence of FOMC as it is critical for its success. 

Wall Street Journal reported that Treasury Secretary Bessent will start Fed Chair interviews on Friday. 

Fed Governor Waller called for multiple rate cuts beginning in September as monetary policy is restrictive with benchmark Fed fund rate above neutral rate.   ALSO READ | Silver outlook positive; ₹122,000 acts as key support, ₹131,000 next target

Upcoming data:

US nonfarm payroll report (August) will be released today. The report may give more clarity on the probable monetary policy trajectory of the Federal Reserve; thus, would be crucial for the financial markets.

 

Outlook: 

As the Fed Chair Powell’s focus has shifted from inflation to the weakening US job market, the US monthly job report will be critical for gold for short-term trading. A Goldilocks report will almost seal a 25-bps rate cut in September. A disappointing report will boost the possibility of successive rate cuts. Gold will gain in either of these cases albeit with a correction in the first case. Focus will be on downward job revisions also as August job report showed massive job revisions calling into question health of the US job market. The job report is likely to reflect weakness in job market. 

Upside surprises in the report will lead to a short-term correction in gold prices. However, investors also need to monitor other factors like debt concerns, geopolitical risks, risks to Fed, etc. 

Overall, gold outlook remains constructive with a possible test of $3650 resistance (₹109,500) in the coming weeks. Support is at $3500 (₹105,000)/$3450 (₹103,600). MCX levels at USDINR rate of ₹88.15.

 

(Disclaimer: Praveen Singh,  head currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)