Gold clings to intraday gains as USD remains on the back foot ahead of US NFP

• Gold trades with a positive bias for the second straight day amid a modest USD downtick.
• Elevated Fed hike bets and Iran risks should limit USD losses and cap the precious metal.
• Traders might also opt to wait for the key US NFP report before placing directional bets.

Gold (XAU/USD) maintains its bid tone through the first half of the European session on Thursday amid a modest US Dollar (USD) downtick, though it lacks follow-through and remains confined within the previous day's broader range.

Elevated US Federal Reserve (Fed) rate-hike expectations, along with geopolitical risks, act as a tailwind for the buck and cap the upside for the bullion. Traders also seem hesitant and now await the release of the closely watched US monthly employment data before placing aggressive directional bets.

Automatic Data Processing (ADP) reported on Wednesday that private sector employment in the US rose by 98K in June, down from the previous month's unrevised reading of 122K and missing consensus estimates of 113K. Furthermore, the Institute for Supply Management’s (ISM) Manufacturing PMI eased from 54 to 53.3 in June. Adding to this, the Prices Paid Index fell to 73 from 82.1, while the Employment Index edged up to 49.7 from 48.6 in May. Adding to this, the recent slump in Crude Oil prices has dramatically tempered near-term inflation fears and prompts some USD selling, which, in turn, is seen as a key factor acting as a tailwind for the Gold price.

Nevertheless, the CME Group's FedWatch Tool indicates that traders are still pricing in around a 64% chance that the US central bank will raise borrowing costs in September and assigning a nearly 85% probability of a move by the end of this year. The bets were reaffirmed by Fed Chair  Kevin Warsh's comments on Wednesday, saying that he will stick to the 2% inflation target and disappoint anyone who expects loose monetary policy despite ​President Donald Trump's call for rate cuts. Moreover, several Fed officials have indicated that higher interest rates may be necessary to bring inflation back to the 2% target. This should limit USD losses and cap the non-yielding Gold.

Meanwhile, Iran and the US concluded a round of indirect talks in Qatar with no sign that the two countries have made headway toward lasting peace amid tensions over the critical Strait of Hormuz. Separately, Russia launched a barrage of missiles and drones on Ukraine’s capital, Kyiv, early Thursday. This keeps geopolitical risks in play and favors the USD bulls as the focus remains on the release of the US Nonfarm Payrolls (NFP) report, due later during the North American session. The crucial data remains a key driver of the Fed's monetary policy, which, in turn, should influence the buck and help investors determine the near-term trajectory for the Gold price.

XAU/USD 4-hour chart

Gold might face stiff hurdle and attract sellers near 38.2% Fibo.

From a technical perspective, the overnight short-covering rally faltered near the 38.2% Fibonacci retracement level of the recent decline witnessed over the past two weeks or so. Moreover, the XAU/USD pair remains below the 100-period Simple Moving Average (SMA), reinforcing a near-term bearish bias.

However, momentum indicators are improving, with the Moving Average Convergence Divergence (MACD) turning higher above zero and the Relative Strength Index (RSI) holding around 54. Furthermore, acceptance above the 23.6% Fibo. backs the case for additional recovery attempts that remain constrained by the prevailing structure.

Meanwhile, immediate resistance is located at the 38.2% Fibo. at $4,112.32, followed by the 100-period SMA at $4,145.47 and the 50% retracement at $4,164.62. Successive barriers are pegged at the 61.8% level at $4,216.91, the 78.6% retracement at $4,291.37, and the cycle high at $4,386.20.

On the downside, initial support is seen at the reclaimed 23.6% retracement at $4,047.62, while a deeper slide would expose the structural floor around the swing low at $3,943.03.

(The technical analysis of this story was written with the help of an AI tool.)