Are Gold Bulls Ready to Strike? Price Nears Upper Band, Non-Farm Payrolls May Determine Success or Failure

On Thursday (June 5), spot gold traded around $3,380 during the day, not far from the multi-week high touched on Tuesday. Currently, the market is on the sidelines ahead of the US non-farm payrolls report, with gold bulls continuing to build momentum for a breakout, supported by fundamental factors.

Fundamentals

The latest economic data released by the US has been generally weak, providing short-term support for gold. ADP employment data showed that only 37,000 jobs were added in the US private sector in May, the lowest since March 2023. Meanwhile, the ISM Services PMI unexpectedly fell to 49.9, marking the first time it has entered contraction territory since June last year. The weakening of both employment and services data has strengthened market expectations that the US Fed will further cut interest rates in 2025.

At the same time, US Treasury yields have declined, with both the two-year and ten-year yields falling to their lowest levels since early May, reflecting market recognition of the future path of monetary easing. The expansion of the fiscal deficit and market concerns about Trump's new round of tax cut bills have also weighed on the US dollar, further boosting the appeal of gold, a non-interest-bearing asset.

In addition, global geopolitical risks are also heating up. According to Reuters, the situation in Ukraine has not yet eased, and the US has vetoed the UN proposal for a ceasefire in Gaza for the fifth time, keeping gold's safe-haven demand at a high level. Ahead of Friday's non-farm payrolls report, the market is generally cautious, with bullish and bearish forces temporarily locked in a stalemate.

Technical Analysis:

From the daily chart, gold is currently oscillating between the middle and upper Bollinger Bands, still in a consolidation phase within an overall uptrend. After breaking above $3,300, the price has temporarily faced resistance at the $3,430 level, which is a previous high area and also corresponds to the short-term resistance represented by the upper Bollinger Band. Analysts believe that if there is a subsequent breakout with increased volume above $3,430, it is expected to challenge the high of $3,499.83 again.

In terms of the MACD indicator, the fast line (DIFF) and the slow line (DEA) are above the zero axis, showing a mild golden cross. The histogram has turned slightly positive, with momentum beginning to recover, suggesting the possibility of further short-term strengthening.

The Relative Strength Index (RSI) is currently hovering around 58, with no overbought signals appearing, indicating a relatively neutral to slightly bullish market sentiment, leaving room for subsequent gains.

From an overall structural perspective, gold is exhibiting a clear sideways consolidation pattern, with support at the $3,300 level and resistance at the $3,430 level. Once a breakout occurs, there is potential for further upside.

Market Sentiment Observation

The current market sentiment is cautious but not pessimistic. Although bulls lack decisive driving forces, overall open interest still reflects a preference for safe-haven assets. Market expectations for an inflection point in US interest rate policies are becoming increasingly clear, while sentiment toward geopolitical events is also heating up. Despite traders remaining on the sidelines ahead of the release of the NFP data, analysts believe that any pullback will be seen as a buying opportunity, indicating that the market consensus still leans toward a medium-term bullish outlook for gold.

Outlook

Short-term outlook: The short-term trend of gold depends on the performance of the NFP data on Friday. If non-farm payrolls continue to weaken, it will trigger gold to break through the resistance level of $3,430 and rapidly test the previous high of $3,499. Conversely, if the data unexpectedly strengthens, there may be a possibility of retesting the support level of $3,300.

Medium and long-term outlook: Against the backdrop of escalating global political uncertainties and strengthened expectations for a policy shift by the US Fed, the probability of gold maintaining an upward trend is relatively high. Especially under the expectation of marginal easing of US dollar liquidity, gold's dual role as a safe-haven asset and a hedge will continue to be favoured by the market.