Gold price (XAU/USD) recovers some lost ground above $4,020 during the Asian trading hours on Monday. The weaker US Dollar (USD) and speculation that incoming Democrats would push to end the Iran war lift the yellow metal.
Bloomberg reported that Democrats, who secured majorities in both the House and Senate, are strongly opposing US President Donald Trump’s proposed $1.5 trillion defense budget and appear determined to prevent its passage.
A source familiar with the discussions indicated that Democrats are likely to only approve a defense budget figure around $1 trillion. They are anxious not to be seen approving continued funding for the war against Iran.
However, the potential upside for the precious metal might be capped, as the upbeat US jobs data could boost the US Dollar (USD) and weigh on the USD-denominated commodity price. The US economy added 165,000 jobs in October, compared to 60,000 recorded in September, the US Bureau of Labor Statistics (BLS) reported on Friday. This figure beat the estimate of 65,000. The Unemployment Rate fell to 4.1% in October, down from 4.2% in September.
Stronger-than-expected US payrolls data reinforced expectations that the Federal Reserve (Fed) could keep interest rates higher for longer. Higher interest rates increase the opportunity cost of holding non-yielding gold, making gold less attractive to investors.
Traders currently see around 79.6% odds that the Fed will raise rates in December, compared with 72.8% before the US jobs report, according to the CME FedWatch tool.
“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,” independent metals trader Tai Wong said.
Gold consolidates as equity selloff tests safe-haven appeal
Analysts at OCBC note that gold “pared earlier gains after rising to a two-week high above $4,140 at one point overnight,” with the subsequent rebound in oil prices and some stabilization in the Dollar limiting further upside momentum, even as “softer US Treasury yields continued to lend support.” They flag that “the deepening selloff in AI and semiconductor stocks warrants some near-term caution,” warning that “should equity weakness trigger broader deleveraging, gold may not be spared from liquidity-driven selling as investors raise cash.”
That said, OCBC highlights that “gold’s relative resilience despite the sharp equity selloff is encouraging.” In their view, “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,” though “the extent to which gold can hold up if equity weakness persists will be an important test.”
Into the near-term data calendar, OCBC expects “some consolidation remains likely ahead of US payrolls report tonight.” They argue that “softer employment data could further temper Fed tightening expectations, weigh on yields and USD, and allow gold’s recovery to extend,” with “next Tuesday’s US CPI” flagged as “another key test, while oil prices remain an important driver of inflation and rate expectations.” Technically, they note that “gold last seen at 4088 levels,” with “daily momentum turned mild bullish but rise in RSI moderated,” and judge that “consolidation [is] likely after the recent sharp rebound.”
XAU/USD daily chart
Technical Analysis: Gold remains capped below the 100-day SMA
In the daily chart, XAU/USD remains capped in a broadly bearish near-term setting, with spot still below the 100-day simple moving average (SMA). Price holds modestly above the 20-day Bollinger band middle line, suggesting some underlying demand, but the proximity of the upper band highlights a dense overhead barrier. The Relative Strength Index (RSI) at 50.30 sits around neutral, hinting that the latest bounce lacks decisive momentum to challenge the prevailing topside resistance structure.
On the topside, immediate resistance is located at the 100-day SMA at $4,200, followed by the Bollinger upper band around $4,225, which together define the zone that bulls would need to reclaim to ease the current bearish bias. On the downside, initial support is offered by the current price region around $4,095, with the Bollinger middle band at $4,065 underpinning the short-term range; a deeper slide would expose the lower band support near $3,900, where sellers could become more cautious.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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