Gold (XAUUSD) rebounded on Friday after retracing from recent highs in the wake of stronger-than-expected Nonfarm Payrolls (NFP) data. Spot gold surged back above $3,340 during early European trading hours, with risk sentiment tempered by growing alarm over US fiscal sustainability.
Thursday’s approval of President Donald Trump’s sweeping tax-and-spending plan—a bill projected to add $3.4 trillion to the national debt—sparked unease in global markets. Investors increasingly fear long-term implications for the US Dollar’s stability, fueling renewed interest in safe-haven assets such as gold.
Despite recent hawkish repricing of Fed expectations, traders remain reluctant to give up on gold amid a cocktail of macro risks ranging from ballooning debt to trade conflicts.
US Dollar Falters Despite Strong Jobs Data
The greenback briefly touched a one-week high on Thursday after the US Bureau of Labor Statistics revealed that Nonfarm Payrolls rose by 147,000 in June, topping forecasts of 111,000. The unemployment rate also ticked down to 4.1%, strengthening the argument for the Fed to hold off on rate cuts.
However, the initial USD rally fizzled out as investors shifted focus to Trump’s “One Big Beautiful Bill”, which cleared its final hurdle in Congress. The massive fiscal stimulus—though cheered by some for potential growth effects—has drawn criticism for worsening America’s long-term debt profile.
The Congressional Budget Office (CBO) warned the bill could increase US debt to unsustainable levels, pressuring the US Dollar and supporting gold.
Wage Growth Cools: A Silver Lining for Gold Bulls?
While the NFP headline beat expectations, other components of the jobs report gave gold bulls some breathing room. Wage growth, as measured by Average Hourly Earnings, slowed to 0.2% MoM in June from 0.4% in May. The annual pace cooled to 3.7% YoY from 3.8%.
This dampened fears of overheating inflation, keeping alive hopes for at least two 25-basis-point Fed rate cuts before year-end. Traders scaled back expectations of a July rate cut but did not completely rule it out.
With inflation pressures seemingly easing and fiscal risk rising, the gold market finds itself supported by a “Goldilocks” macro environment—not too hot, not too cold.
Trade Jitters Amplify Demand for Safe Havens
Adding fuel to gold’s ascent is the rising risk of a full-scale tariff escalation. Trump signaled Thursday that he would begin notifying trade partners of their current tariff structures, hinting at a more aggressive posture ahead of the July 9 deadline.
Markets are bracing for higher reciprocal tariffs, which could derail fragile negotiations and revive fears of a trade war. Given gold’s traditional role as a geopolitical hedge, any escalation in tensions is likely to draw more inflows into the yellow metal.
Liquidity Light, but Bias Favors Upside
US markets are closed Friday in observance of Independence Day, resulting in holiday-thinned liquidity that could curb sharp intraday moves. Still, the underlying momentum favors gold bulls, with the commodity poised to snap a two-week losing streak.
Short-term traders may remain cautious, but longer-term investors appear to be rotating back into gold as a strategic hedge against debt, inflation, and geopolitical instability.
Technical Outlook: Gold Aims to Reclaim Multi-Week Highs
From a technical perspective, the $3,340-$3,345 zone now acts as a near-term support-turned-resistance, while a break above $3,360 could pave the way for a test of the recent peak near $3,375—a one-and-a-half-week high.
Immediate support: $3,320 followed by $3,295
Resistance levels: $3,360 and $3,375
RSI indicator: Gradually recovering, approaching neutral zone
Momentum: Positive bias building, pending confirmation from volume
A strong close above $3,345 on Friday would reinforce the bullish breakout narrative and set the stage for continued upside next week, particularly if US macro headwinds persist.
Macro Risks: From Fiscal Crisis to Trade Shocks
US Fiscal Cliff Approaching?
With government debt set to rise sharply under Trump’s latest legislation, bond markets may react negatively in the weeks ahead. Higher borrowing needs could stoke fears of rising yields, although a Fed cut might help cap the damage.
Geopolitical Flashpoints
Beyond tariffs, other geopolitical tensions—including Middle East instability, ongoing Russia-Ukraine standoff, and South China Sea disputes—add to gold’s appeal as a volatility hedge.
Fed Policy in Flux
The Fed’s next move remains data-dependent. If July’s CPI or PPI prints show further cooling, it could reignite speculation of a summer rate cut, giving gold another leg up.
Weekly Summary: Gold Set to Snap Two-Week Losing Streak
Week Ending Weekly Performance Key Driver
June 21 -0.7% Hawkish Fed talk
June 28 -0.3% Strong USD recovery
July 5 (est.) +1.1% Fiscal fears, USD drop
Gold’s bounce this week is largely attributed to macro-level structural concerns rather than short-term data noise. This reaffirms gold’s role as a portfolio diversifier amid rising uncertainty.
Conclusion: Gold Reclaims Shine Amid Macro Turbulence
As the dust settles from the NFP surprise and markets weigh Trump’s budget bombshell, gold finds itself back in favor. The convergence of a weaker USD, muted inflation pressures, exploding fiscal risks, and rising trade tension creates a supportive backdrop.
Unless the Fed turns more aggressively hawkish or trade negotiations produce a surprise breakthrough, gold appears poised to maintain its upward trajectory into next week, with $3,375 and beyond in sight.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Always conduct your own research and consult a professional advisor before making investment decisions.
[sc_fs_multi_faq headline-0=”h2″ question-0=”Why is gold price rising despite strong US jobs data?” answer-0=”Because broader macro concerns—like ballooning US debt and global trade risks—are overshadowing the positive employment figures, pushing investors into safe-haven assets.” image-0=”” headline-1=”h2″ question-1=”How does Trump’s fiscal bill affect gold prices?” answer-1=”The $3.4 trillion increase in national debt weakens confidence in the US Dollar and boosts the appeal of gold as a hedge against long-term fiscal instability.” image-1=”” headline-2=”h2″ question-2=”What role do trade tensions play in gold’s rally?” answer-2=”Rising tariffs and uncertainty in trade negotiations push investors toward gold, which acts as a geopolitical and economic hedge.” image-2=”” count=”3″ html=”true” css_class=””]
