Gold’s Path Higher: Weak Labor Data and Key Economic Releases in Focus

Gold is finding strong support, with the dollar weakening and real yields on the decline. Today’s economic releases, especially the ISM Services data and critical employment reports, could provide the fuel for gold to continue its path higher. Traders are paying close attention to both as they shape the broader narrative of a slowing US economy and the Federal Reserve’s response.

The ADP and Jolts job openings reports earlier this week already pointed to labor market softening, and if today’s initial and continuing jobless claims come in weaker than expected, gold could see another surge. Jobless claims above 238,000 or continuing claims exceeding 1.899 million would indicate that the labor market is losing steam, reinforcing expectations for a 50-basis point Fed rate cut in September. This would push the dollar lower, which typically provides a boost to gold as a safe-haven asset.

At the same time, the ISM Services report plays a pivotal role in today’s outlook for gold. If the headline figure comes in below 49.6, it would signal that the service sector—another key part of the US economy—is slowing down. This, paired with weak labor data, would create a perfect storm for more aggressive Fed action, further weakening the dollar and increasing demand for gold. The employment component within ISM, if it drops below 51.1, could add to the growing concerns about a softening labor market.

Inflation is another important factor, and the prices paid component of the ISM data will be closely watched. If it falls below 56.9, this could indicate that inflationary pressures are easing, giving the Fed more room to cut rates. Lower inflation expectations combined with weak labor data would be highly supportive for gold, pushing it closer to the key 2520 level.

For gold traders, today presents a critical moment. Weak labor data combined with soft ISM numbers could send gold prices higher, driven by expectations of a dovish Fed and a weaker dollar. However, a stronger ISM report or better-than-expected jobless claims could strengthen the dollar and limit gold’s upside, making today’s data pivotal for the yellow metal’s short-term trajectory.

Be ready—these combined economic indicators could significantly impact gold’s path and broader market sentiment.