Gold prices hit a 7-week high amid signs of a softening labor market in the US... Concerns over increased volatility ahead of PCE data release

Gold(XAU/USD) prices surpassed $4,300 during Wednesday’s Asian trading, reaching near a 7-week high. Following the U.S. Bureau of Labor Statistics(BLS) release, market interpretation shifted to a ‘softening signal,’ leading to a strengthening of the dollar’s weakness, which directly impacted dollar-denominated assets like gold.

Mixed Labor Market Signals Keep the Fed’s Additional Rate Cuts Possible

November non-farm payrolls(NFP) increased by 64,000. While this exceeded market expectations(50,000), considering the 105,000 decrease in October, a slowdown trend cannot be denied. More notably, the unemployment rate rose from 4.4% to 4.6%. Average hourly wages also increased by only 0.1% month-over-month, significantly slowing down from the previous month’s(0.4%) rise.

Consumer spending also shows signs of weakening. October retail sales remained flat(0.0%) against expectations, and September figures were revised downward. These signals are being interpreted by the market as indications that “the Fed still has room for further rate cuts.”

Technical Strength Continues, $4,305 as a Critical Level

Technically, gold maintains strong short-term momentum. On the 4-hour chart, it is supported above the 100-day exponential moving average(100-day EMA), and the 14-day RSI remains above the centerline, indicating sustained buying sentiment. The expanding Bollinger Bands pattern also supports the trend’s strength.

The upper resistance level is at the Bollinger Band upper boundary of $4,305. A sustained break above this level could open the way to retest the December 15 high of $4,350. If additional gains continue, the all-time high of $4,381 could come into view.

If a correction begins, the first support is at the December 16 low of $4,271, with the next defense line likely at the 100-day EMA of $4,220.

PCE Data, Fed Statements, and Reassessment of Rate Expectations

Future variables are quite significant. Changes in tone may be detected from the Fed officials’ speeches scheduled for Wednesday. Federal Reserve Bank of New York President John Williams and Atlanta Fed President Raphael Bostic are scheduled to speak, and a hawkish tone could lead to a short-term rebound in the dollar, putting pressure on gold.

More importantly, Thursday’s U.S. November Consumer Price Index(CPI) and Friday’s Personal Consumption Expenditures(PCE) releases are critical. The PCE release is a key basis for the Fed’s actual rate cut decisions, and it could significantly reshape market expectations for rate cuts.

Currently, the market anticipates two rate cuts next year, with the probability of holding rates steady at the January meeting reflected at 75.6% according to the CME FedWatch Tool. This is an increase from about 70% a week ago, indicating that the market is gradually lowering its expectations for rate cuts.

The Fed cut rates by 25 basis points at its December policy meeting last week, but internal opinions are divided on additional cuts in 2026. This uncertainty is expected to contribute to volatility in gold prices.