XAU/USD needs a weekly closing above $4,165 to sustain the recovery

• Gold builds on post-US NFP gains early Friday, sitting at eight-day highs just shy of $4,200.
• The US Dollar eyes a weekly loss amid easing Fed rate hike bets and the USD/JPY sell-off.
• Gold’s technical setup suggests a ‘sell-on-bounce’ trade amid bearish RSI and Death Cross.

Gold is holding firm near eight-day highs just below $4,200 in Friday’s Asian trades, on track to snap a four-week losing streak.

Buying interest in Gold remains unabated as the bright metal extends its recovery from the seven-month low of $3,942 reached earlier this week.  In doing so, the bullion has taken out several key resistance levels, helped by the ongoing pullback in the US Dollar (USD) against its six major currency rivals.

The Greenback bears the brunt of renewed diplomatic efforts between the United States (US) and Iran toward a permanent peace deal and receding US Federal Reserve (Fed) interest-rate hike bets.

Qatar said on Wednesday that the discussions through mediators between the US and Iran made “positive progress.” Meanwhile, Iran issued a fresh warning for vessels to follow Tehran-designated routes through the Strait of Hormuz.

However, markets seem to pay little attention to the Middle East developments as the optimism over fading hawkish Fed expectations lifts risk sentiment.

On Thursday, the US Nonfarm Payrolls increased by 57,000 in June, well below expectations for a 110,000 rise. The Labor Force Participation Rate dropped to 61.5%, a more than five-year low. The weak jobs data suggested worsening US labor market conditions and prompted traders to dial down their bets for a potential rate hike in September.

Markets are now pricing in roughly a 54% chance of such a move in September, down from 66% before the data, according to the CME Group’s FedWatch Tool.

Recent less-hawkish comments from new Fed Chair Kevin Warsh also remain a drag on the USD, boding well for the non-yielding Gold. Warsh said he’s been encouraged by the recent easing of inflation expectations during his appearance at the European Central Bank (ECB) Forum in Sintra on Wednesday.

Furthermore, the recent USD/JPY sell-off, amid looming Japanese intervention risks, acts as a headwind for the buck.

Looking ahead, it remains to be seen if Gold retains its recovery momentum, as traders could resort to profit-taking heading into the weekend and thin liquidity, with the US celebrating Independence Day on Friday.

Additionally, Gold’s technical setup on the daily chart continues to caution buyers, despite easing bearish pressures.

In the daily chart, XAU/USD trades at $4,182.02. The near-term bias remains bearish as price holds below the 50-day simple moving average (SMA) at $4,402.46, the 200-day SMA at $4,486.06 and the 100-day SMA at $4,636.39, keeping the broader structure capped despite a modest rebound from recent lows. The 21-day SMA at $4,165.03 now offers nearby dynamic support, while the Relative Strength Index (14) at 47.24 hovers just below the neutral line, hinting at subdued but stabilizing downside momentum rather than a decisive bullish shift.

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