XAU/USD finds acceptance above $4,000, but US NFP holds the key

• Gold holds the previous recovery above $4,000 as all eyes turn to US Nonfarm Payrolls.
• The US Dollar pulls back sharply on pre-NFP profit-taking and optimism linked to US-Iran talks.
• Gold’s technical setup suggests a ‘sell-on-bounce’ trade amid bearish RSI and Death Cross.

Gold is looking to build on its previous recovery beyond the $4,000 mark early Thursday, with the next big move hinging on the critical US Nonfarm Payrolls (NFP) data release.

Gold holds positive momentum for the second straight day, having found fresh buyers around the $3,950 region or seven-month lows on several occasions.

The ongoing upswing in Gold is mainly sponsored by the overnight pullback in the US Dollar (USD), particularly after the US ISM Manufacturing PMI disappointed with 53.3 in June and Federal Reserve (Fed) Chairman Kevin Warsh downplayed inflation concerns.

Warsh said he’s been encouraged by the recent easing of inflation expectations, but quickly added that the central bank will deliver on its price stability mandate.

The new Fed Chair delivered a moderately hawkish message, with an FXS SpeechTracker score of 5.6/10 that cannot be benchmarked relative to the historical average but still signals a clear focus on price stability. The key remark that the Fed will “chart a new course” while refusing to give forward guidance underscores a shift toward data-dependent, flexible policymaking, even as Warsh stresses that inflation above 2% will disappoint the central bank and highlights AI as a potentially pivotal, yet still-assessed, driver of future price dynamics. Warsh’s emphasis on steady labor markets, a solid supply side, and declining inflation expectations reinforces a tone of cautious confidence rather than outright dovishness.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-hawkish level of 123.64, indicating that the speech did not materially alter the market’s perception of Fed policy bias. The combination of a stable, elevated index reading and a mid-range FXS Speechtracker score suggests that markets continue to see the Fed as firmly committed to containing inflation, even as Warsh refrains from offering explicit forward guidance.

These drivers knocked off the USD alongside the short-term US Treasury bond yields, allowing the non-yielding bullion to stage a decent comeback.

The latest leg down in the Greenback is driven by renewed optimism around the US-Iran peace talks. Qatar said late Wednesday that “meetings in Doha through mediators between US and Iranian negotiators made "positive progress” on issues tied to the memorandum of understanding (MoU), with both sides agreeing to continue discussions, per CNN News.

However, risks remain skewed to the downside for Gold as traders eagerly await the US labor market report on Thursday, which is expected to reaffirm expectations of at least two Fed rate hikes this year. The US celebrates Independence Day on Friday, and thus, the US job report will be released this Thursday.

Markets currently price in about 80% odds of a rate hike in September, according to the CME Group’s FedWatch Tool, with two more hikes expected before the year ends.

The US economy is likely to have added 110,000 jobs in June after a solid increase of 172,000 in May. The Unemployment Rate is set to remain unchanged at 4.3% in the reported period.

A stronger-than-expected headline NFP reading could bolster hawkish Fed rate hike bets, boosting the USD and US Treasury bond yields at the expense of Gold.

On the other hand, a downside surprise in the print could prompt markets to scale back Fed rate hike bets, providing additional legs to the Gold price recovery from multi-month troughs.

It’s worth noting that Gold dived over 3% in response to the blockbuster May NFP report.

In the daily chart, XAU/USD trades at $4,062.07, extending its decline well below all major moving averages and maintaining a bearish near-term bias. Spot gold remains capped by the 21-day simple moving average (SMA) at $4,176.10, with the 50-day SMA near $4,411.79 and the 200-day SMA at $4,483.53 reinforcing a dense overhead supply zone. The longer-term 100-day SMA at $4,643.11 stays far above price, hinting at a broader downtrend, while the Relative Strength Index (14) at 38.56 shows weak momentum but stops short of oversold conditions, suggesting sellers still control the tape.

Further backing the downside, the Death Cross remains in play after the 50-day SMA closed below the 200-day SMA on a weekly closing basis last Friday.