Golds Rebound Lacks Conviction As NFP Report Could Reopen Fed Hike Debate

Gold has stopped falling, but it has not started recovering either. After slipping below the psychologically important $4000 level, prices have managed to claw back some losses. Yet the rebound has been hesitant, lacking both momentum and conviction. Rather than signaling renewed confidence, the move looks more like a market unwilling to press either side of the trade ahead of one of the most important US economic releases of the quarter.

The June Non-Farm Payrolls report (on Thursday instead of Friday this week due to U.S. holday) has become far more than a routine employment update. Markets have already settled on the view that the Federal Reserve is likely to deliver one more rate hike this year following Chair Kevin Warsh’s hawkish hold in June. The real question now is whether one hike will be enough. Thursday’s jobs data could either cement that view or revive the discussion over two hikes, putting the Dollar and Gold on sharply different paths.

Expectations:

Economists expect payroll growth to slow from 172,000 to around 115,000-130,000 jobs, with the unemployment rate holding at 4.3% or edging up to 4.4%. Average hourly earnings are forecast to rise 0.3% on the month, while annual wage growth is expected to ease from 3.5% to 3.4%. But this month’s report carries an important twist. The FIFA World Cup has generated a temporary hiring wave across hospitality, transport and event management, with some estimates suggesting it could artificially lift payrolls by roughly 40,000 jobs.

That makes this one of those rare payroll reports where the headline could tell only part of the story. A strong jobs number driven largely by temporary hiring may not convince policymakers that underlying labor demand has reaccelerated. Instead, investors are likely to scrutinize wages, unemployment and broader labor market indicators before deciding whether the Fed needs to tighten policy more aggressively.

The scenarios:

If payrolls broadly match expectations, markets are likely to remain comfortable with pricing one Fed hike, leaving September as the preferred timing while keeping December as a viable fallback should inflation cools. That outcome may not ignite another Dollar rally, but it should also prevent a meaningful correction. For Gold, it would probably mean temporary stability rather than a lasting rebound, especially with June CPI still waiting in the wings two weeks later.

A genuine upside surprise, particularly one accompanied by stronger wage growth, would be a very different story. It would strengthen the case for a September hike, revive speculation about another move in December, and reinforce the Dollar’s medium-term uptrend. Gold would likely struggle to defend the $4000 region under those conditions, opening the door to another leg lower.

A downside surprise appears less likely given the World Cup-related hiring boost, but it cannot be dismissed. Even then, one weaker report is unlikely to fundamentally alter the Fed’s tightening bias after several months of resilient employment. Instead, investors would probably shift expectations from September toward December rather than price out additional tightening altogether. That could allow Gold to establish a temporary base between $4000 and $4400, but probably not mark the beginning of a new bull run.

Gold technicals:

Technically, the recent rebound still resembles a pause within a broader down trend. Consolidation above 3,958.71 temporary low is possible over the near term, but the outlook remains bearish while 4,382.84 resistance limits upside.

The broader decline from the 5,598.38 record high continues to correct the multi-year advance from 1,614.60 (2022 low). Sustained break of 38.2% retracement of 1,614.60 to 5,998.38 at 4,076.57 will pave the way to 50% retracement at 3,606.49 next.