Gold (XAU/USD) rallied more than 1% on Thursday, trading at $4,483 after rebounding from daily lows of $4,424, as a sharp decline in oil prices—over 4% on the day—helped ease inflationary concerns among investors [1]. The positive sentiment was further supported by a weaker US Dollar Index (DXY), which fell 0.21% to 99.34, and declining US Treasury yields, with the 10-year benchmark note dropping three basis points to 4.463% [1].
Market sentiment was described as mixed, with investors rotating out of technology stocks and the Dow Jones Industrial Average poised to reach record highs [1]. In the geopolitical arena, uncertainty persisted due to ongoing hostilities in the Middle East, despite a ceasefire agreement between Israel and Lebanon. However, Hezbollah, an Iran-backed militia, rejected the deal, complicating prospects for a resolution to the US-Iran conflict [1].
On the economic front, US jobs data came in weaker than expected. Initial Jobless Claims for the week ending May 30 were 225,000, higher than the forecasted 213,000 and up from a revised 212,000 the previous week. The four-week average rose to 214,750, about 5,000 above the prior average. May's Challenger Job Cuts increased to 97,006 from 83,387, with nearly 39% of the cuts in the tech sector—a 16% rise from April [1]. Despite these figures, the labor market was described as stable, with traders awaiting the May Nonfarm Payrolls report, expected to show an 85,000 job increase and an unemployment rate steady at 4.3% [1].
Federal Reserve officials commented on the inflation outlook, with Kansas City Fed's Jeffrey Schmid stating that inflation remains too high and is the biggest risk facing the US economy, raising the question of whether the Fed should remain patient on rates or take action. San Francisco Fed's Mary Daly noted that AI is not influencing inflation and that current policy is appropriate [1].
Technically, gold is holding above its 200-day Simple Moving Average (SMA) at $4,427. A break below this level could lead to further downside, while a close above $4,500 could set the stage for a challenge of resistance at the 20-day SMA at $4,562 and potentially $4,600 [1]. The Relative Strength Index (RSI) indicates that buyers are gaining momentum, though the overall trend remains bearish [1].
CONCLUSION
Gold's rally was driven by a combination of falling oil prices, a weaker dollar, and lower Treasury yields, which collectively eased inflation fears and supported bullion. While technical indicators suggest buyers are gaining momentum, the overall trend remains cautious amid ongoing geopolitical uncertainty and mixed economic data. Investors are closely watching upcoming US labor reports and Federal Reserve commentary for further direction.