On Thursday (June 6), spot gold surged by more than $20, approaching the $2,380/ounce mark during the session. Analysts pointed out that the weakening of the US dollar and geopolitical tensions have become the main driving forces for the surge in gold prices. The Israeli military announced on Thursday that it had completed the deployment of a large-scale military operation against Hezbollah in Lebanon. On this trading day, investors focused on the US non-farm payrolls report in May, which is expected to trigger a new trend in the gold market.
FXStreet analyst Christian Borjon Valencia pointed out that gold prices reached a two-week high of $2,378/ounce on Thursday. The number of initial jobless claims in the United States was higher than expected, weakening the dollar and stabilizing US Treasury yields, which is a positive for gold.
Spot gold closed up $20.72, or 0.88%, at $2,375.83/ounce on Thursday, with the highest price of gold hitting $2,378.55/ounce during the session.
The yield on the benchmark 10-year US Treasury bond fell from a daily high of 4.32% to 4.285%. Meanwhile, the dollar index, which measures the performance of the greenback against a basket of six currencies, fell 0.19% to 104.12 on Thursday.
Data released by the U.S. Department of Labor on Thursday showed that the number of initial jobless claims in the United States rose to 229,000 in the week ending June 1, higher than the market expectation of 220,000, a four-week high.
The further cooling of the job market is expected to boost the Fed's confidence in rate cuts. Some analysts believe that if the employment report continues to be unexpectedly weak, it may make rate cuts in September or even July possible again.
The ADP employment data released earlier on Wednesday also fell short of expectations. Data showed that the number of private sector jobs in the United States increased by 152,000 in May, lower than the expected 175,000 and lower than the 188,000 in April.
"The weak ADP employment data on Wednesday has added to bullish confidence that Friday's employment report may not be stronger than expected, which will be good for the gold and silver markets," said Jim Wyckoff, senior analyst at Kitco Metals.
After the latest U.S. jobs data, traders' focus turns to Friday's May nonfarm payrolls report, Valencia wrote. Estimates show that the U.S. economy will add 185,000 jobs, up from 175,000 in April. The unemployment rate is expected to be 3.9%, and average hourly earnings are expected to remain unchanged at 3.9%. Weaker-than-expected nonfarm payrolls could increase the likelihood of a Fed rate cut.
According to CME's "FedWatch" tool, traders currently see a 57% chance of a Fed rate cut in September.
Because gold does not earn interest, lower interest rates can reduce the opportunity cost of holding gold, making it more attractive to investors.
David Meger, director of alternative investments and trading at High Ridge Futures, said that if Friday's nonfarm payrolls report is stronger than expected, it will be difficult for the Fed to cut interest rates soon, which will put some pressure on the gold market.
The situation in the Middle East continues to be tense. The Israeli army is ready to launch a large-scale offensive against Hezbollah.
FXStreet analyst Haresh Menghani pointed out that the continued geopolitical tensions caused by the ongoing conflict in the Middle East continue to be a driving force for gold prices to avoid risks.
Sources in the Gaza Strip of Palestine said on June 5 that the Israeli army bombed many areas in the central Gaza Strip from the evening of the 4th to the morning of the 5th, killing at least 75 people. Sources said that the Israeli army airstrikes and shellings hit the Bureja refugee camp and the Magazi refugee camp in the central Gaza Strip, as well as the eastern part of Deir al-Balah. The attack killed 75 people, including women and children, and dozens of others were injured.
In addition, the Israel Defense Forces announced on Thursday that it had completed the deployment of a large-scale offensive against Hezbollah in Lebanon.
According to a statement issued by the Israel Defense Forces on Thursday, Golding, commander of the Defense Forces Northern Command, said at the 18th anniversary ceremony of the 2006 Lebanon War that the Israeli army's mission is to restore security in northern Israel, and preparations have been completed in the past week.
Israeli Prime Minister Benjamin Netanyahu said on Wednesday during a visit to a military base in the northern town of Shemona that Israel is ready to take "very drastic action" against Hezbollah in Lebanon in the north.
Al Jazeera said the Israeli army is waiting for the government's decision to turn the front against Hezbollah in Lebanon into a "primary battlefield" and the war in the Gaza Strip into a "secondary battlefield."
The Israeli Broadcasting Corporation said the Israeli government has allowed the call-up of an additional 50,000 reserve soldiers to prepare for the escalation of the war on the Lebanese front.
The Israeli Defense Forces confirmed on Wednesday afternoon that the town of Hurfesh in northern Israel was attacked by missiles from the direction of Lebanon, injuring 11 people.
Israeli Chief of Staff Halevy said on Tuesday that the Israeli army has been fighting Hezbollah in Lebanon in the north for about eight months. Hezbollah has increased the frequency of its attacks on Israel in recent days, and the Israeli army is ready to launch an offensive against Hezbollah in the north.
Since the outbreak of the Israeli-Hazbollah conflict on October 7 last year, the Israeli army and Hezbollah have continued to exchange fire in the Israeli-Lebanese border area, causing casualties on both sides from time to time. A large number of residents in the southern Lebanese and northern Israeli border areas have been evacuated.
Gold Technical Analysis
FXStreet analyst Christian Borjon Valencia noted that gold prices extended their gains after consolidating in the $2,320-2,360/oz area, and buyers conquering the top of the range opened the door for further gains in gold prices. Momentum remains on the buyer side as the relative strength index (RSI) remains bullish.
Valencia said that if there is further strength, the next resistance level for gold prices will be $2,400/oz, followed by the year-to-date high of $2,450/oz.
On the other hand, if gold prices fall below $2,350/oz, the next support level will be the 50-day simple moving average of $2,337/oz, Valencia added. The next bearish target will be the low of $2,303/oz on May 8, followed by the cycle low of $2,277/oz on May 3.
FXStreet analyst Joaquin Monfort noted that gold prices have broken out of the $2,315-2,358/oz range. The upside breakout makes the short-term downtrend questionable and could mark a reversal.
Monfort said that after breaking out of the range, the current target for gold is $2,385 an ounce. The medium- and long-term trend of gold remains bullish, and the risk of recovery remains high.