Why is gold back above $4,400 and could payrolls send it even higher?

Gold rebounded above $4,400 an ounce on Thursday as softer US labour data and easing Treasury yields gave bullion some relief after its sharpest pullback in weeks.

Spot gold climbed more than 1% to around $4,435 in later Asian trading, while US futures rose about 1.5% to $4,480.

The move followed a drop to a near one-month low earlier this week, when higher oil prices and a renewed surge in bond yields revived expectations for another Federal Reserve rate increase.

Attention now turns to Friday’s August payrolls report, the final major labour-market release before the Fed’s September 15-16 meeting.

Gold gets relief as yields retreat

The immediate support came from a softer rates backdrop.

US private employers added 38,000 jobs in August, according to ADP, below the 47,000 expected by economists surveyed by The Wall Street Journal.

July’s increase was revised to 44,000. The miss helped pull Treasury yields back from multi-year highs and weakened the dollar, both supportive for non-yielding gold.

Wednesday’s Fed Beige Book also showed only very slight employment growth across the economy, while prices increased at a moderate pace in most districts.

The report highlighted elevated energy, transport and raw-material costs, suggesting the inflation picture remains uncomfortable even as hiring cools.

That leaves bullion caught between two forces: weaker employment data reduce the case for aggressive tightening, but high energy costs keep inflation risks alive.

Payrolls now hold the September key

Friday’s nonfarm-payrolls report has become the main event.

Economists expect roughly 50,000-55,000 jobs to have been added in August after payrolls fell by 23,000 in July. The unemployment rate is expected to remain around 4.1%.

Markets still assign roughly a 60%-plus probability to a quarter-point Fed increase this month, but those odds have eased after Wednesday’s weaker ADP reading.

Konstantinos Chrysikos of Kudo.com, cited by The Wall Street Journal, said weaker payroll figures could reduce downside pressure on gold by pulling rate expectations lower.

Stronger employment data or more hawkish Fed commentary would work in the opposite direction.

For bullion, the relationship is straightforward. Lower expected rates reduce the opportunity cost of holding gold, while higher yields and a stronger dollar generally work against it.

Technical rebound needs confirmation above $4,500

The recovery has also improved the short-term chart after gold held an important support zone.

StoneX senior market analyst Matt Simpson told The Wall Street Journal that Comex gold could move towards $4,600 after prices found support around the 200-day exponential moving average and a key weekly volume level.

He also sees signs that selling momentum is beginning to fade.

Kitco’s latest technical work puts initial resistance around $4,422, followed by $4,487 and $4,573.

On the downside, roughly $4,320 remains the first important support, with a deeper break exposing the $4,230 region.