Gold rose for a second day, up over 0.50%, as Japan’s FX intervention weakened the US Dollar. XAU/USD traded at $4,643 after bouncing from $4,560.
Iran sent a proposal to the US via Pakistan, which helped push Oil lower and supported risk sentiment. WTI was $101.91 per barrel, down over 3% on the day.
Dollar Weakness Supports Gold
Japanese authorities intervened on Thursday, spending up to $35 billion, compared with $36.8 billion in July 2024, based on Bank of Japan data. The US Dollar Index was down 0.03% at 98.07.
Federal Reserve messaging pointed to interest rates staying “higher for longer” amid inflation pressures linked to the Middle East conflict. Prime Terminal data shows money markets expect rates to stay unchanged through the year.
US ISM Manufacturing PMI for April was 52.7, unchanged from March. The prices-paid measure rose from 78.3 to 84.6, the highest since April 2022.
Gold is holding near $4,550, with resistance above $4,700 and a moving-average zone at $4,718–$4,749, then $4,834. Support levels are $4,600, then $4,510 and $4,351.
Central Bank Demand Underpins Prices
Central banks added 1,136 tonnes of gold worth about $70 billion in 2022, according to the World Gold Council.
We are seeing gold caught between two powerful forces right now. The US Dollar is weakening due to Japan’s heavy intervention in the currency markets, which is historically supportive for gold prices. However, the Federal Reserve remains very hawkish, with several members even suggesting the next move could be a rate hike, which typically caps gold’s upside.
The Japanese intervention, similar to the actions we saw back in 2022 and 2024, may only provide a temporary boost for gold. The market’s attention will quickly shift to next week’s US Nonfarm Payrolls (NFP) report for April. A strong jobs number, particularly with wage growth above the expected 0.3% month-over-month, would reinforce the Fed’s “higher for longer” stance and could send the dollar soaring, pushing gold back down toward its support at $4,510.
Conversely, a soft payrolls report would challenge the Fed’s narrative and could be the catalyst that breaks gold out of its current range. If the NFP number comes in below 175,000, we could see traders aggressively price in future rate cuts, weakening the dollar and sending gold to test resistance near the $4,750 level. This makes the upcoming data release a critical event for direction.
For derivative traders, this setup suggests positioning for a significant price swing after the NFP announcement. Implied volatility on gold options is rising, indicating the market expects a breakout from the current $4,550-$4,700 range. A long straddle or strangle strategy could be effective, aiming to profit from a large move in either direction without having to predict the outcome of the jobs report.
Beneath the short-term noise, we must remember the strong underlying demand from central banks, which provides a floor for prices. Central bank net purchases hit a record 290 tonnes in the first quarter of 2024, according to the World Gold Council, a trend that is likely continuing. This persistent buying suggests that any significant dips caused by Fed hawkishness may be viewed as buying opportunities by larger players.
The recent drop in oil prices due to Iran’s proposal helps ease immediate inflation fears, but the Fed is more focused on sticky core inflation. The ISM manufacturing survey showed input prices rising to their highest level since April 2022, which will keep policymakers worried. Therefore, we should expect the Fed to remain data-dependent, making next week’s economic reports paramount.
