Gold prices held steady on Monday, trading near three-week highs as investors weighed strong US jobs data against expectations for Tuesday's inflation report. The precious metal climbed to $4,130, up more than 7% from its yearly low, supported by technical signals and ongoing geopolitical tensions.
Jobs report and Fed expectations
The US economy added 165,000 jobs last month, surpassing analyst forecasts, while the unemployment rate fell to 4.1% from an expected 4.2%. Wage growth also strengthened, reinforcing the case for another Federal Reserve rate hike. Most market participants now anticipate a quarter-point increase in December, which would bring the federal funds rate to between 4% and 4.25%.
Despite the robust labor market, gold has managed to hold its ground. The upcoming consumer price index (CPI) report, due Tuesday, is expected to show a month-on-month slowdown in price pressures, though annual inflation is likely to remain above the Fed's 2% target. Bond yields have stayed elevated, with the 10-year Treasury at 4.8% and the 5-year at 4.675%, which typically weighs on non-yielding assets like gold.
Geopolitical and fundamental support
Gold's resilience can also be attributed to developments in Iran, where the situation remained calm over the weekend. Investors had speculated that the Trump administration might launch military strikes, which could have spiked crude oil prices. Instead, the administration is focusing on economic pressure, including an operation to restrict trade between Iran and its 14 neighboring countries. As a result, oil prices barely moved, with Brent crude at $97 and West Texas Intermediate at $90.
Additionally, gold's fundamentals remain supportive. The US public debt has surpassed $40.5 trillion, just months after crossing the $40 trillion mark, and is projected to reach $41 trillion early next year. This persistent fiscal expansion underpins gold's appeal as a hedge against currency debasement and inflation.
Technical outlook: double-bottom pattern
On the daily chart, gold formed a bottom at $3,872 last month and has since rebounded. It is now trading above the $3,937 resistance level, which was the lowest swing in June. More notably, the metal has completed a double-bottom pattern with a neckline at $4,692, its August high. This classic bullish reversal pattern suggests further upside potential.
If the pattern holds, gold could target the $4,300 resistance level in the near term. However, a drop below the key support at $4,000 would invalidate the bullish setup and could trigger a pullback.
Investors will closely monitor Tuesday's inflation data for clues on the Fed's next move. A softer CPI reading could temper rate hike expectations and provide additional support for gold, while a hot print might strengthen the dollar and pressure bullion.
This article is for informational purposes only and does not constitute financial advice.
