Gold price drifts lower on US-Vietnam trade deal, NFP in focus

• Gold price retreats from over a one-week high touched during the Asian session.
• A US-Vietnam trade deal undermines demand for the safe-haven precious metal.
• A modest USD uptick also weighs on the commodity ahead of the US NFP report.

Gold price (XAU/USD) attracts some sellers during the Asian session on Thursday and, for now, seems to have stalled a three-day-old recovery move from a one-month low touched earlier this week. A trade agreement between the US and Vietnam eased concerns over prolonged trade tensions. Apart from this, a modest US Dollar (USD) uptick turns out to be another factor exerting some downward pressure on the safe-haven precious metal. Any meaningful depreciation for the commodity, however, seems elusive in the wake of dovish Federal Reserve (Fed) expectations.

In fact, traders seem convinced that the US central bank would resume its rate-cutting cycle in the near future. The bets were reaffirmed by Wednesday's disappointing release of the US ADP report on private-sector employment. This, along with concerns that the US fiscal condition could worsen further in the wake of US President Donald Trump's budget bill, should cap the USD and support the Gold price. Traders now look to the US Nonfarm Payrolls (NFP) report for cues about the Fed's rate-cut path and determining the near-term trajectory for the non-yielding yellow metal.

Daily Digest Market Movers: Gold price is pressured by positive risk tone, modest USD uptick

• President Donald Trump announced on Wednesday that the United States has struck a trade agreement with Vietnam. The US will impose a lower, 20% tariff on goods imported from the Southeast Asian nation, and the deal will give the US tariff-free access to Vietnam's markets.
• Meanwhile, negotiators from the US and India are pushing to land a tariff-reducing deal ahead of Trump's July 9 deadline. The developments boost investors' confidence and prompt some profit-taking around the safe-haven Gold price following a three-day winning streak.
• However, Trump has indicated no signs of extending the negotiation deadline despite stalled discussions with Japan, another key trade partner. This keeps trade-related uncertainties in play, which, in turn, might continue to offer some support to the precious metal.
• On the economic data front, the Automatic Data Processing (ADP) reported that US private payrolls fell for the first time in more than two years during June. In fact, the US private-sector employment unexpectedly declined by 33K compared to the downwardly revised rise of 29K.
• This comes on top of Tuesday's Job Openings and Labor Turnover Survey, or JOLTS report, and underscores a deteriorating trend in the US labor market. Moreover, a sluggish hiring environment might force the Federal Reserve (Fed) to start cutting interest rates again as early as this month.
• In fact, traders are currently pricing in nearly a 25% chance of a rate cut by the Fed at the July 29-30 monetary policy meeting. Moreover, a 25 basis point rate cut in September is all but certain, and expectations for two rate reductions by the end of this year are also high.
• Dovish Fed expectations should keep a lid on the US Dollar's attempted recovery from a three-and-a-half-year low and contribute to limiting losses for the non-yielding yellow metal. Traders might also opt to wait for the release of the US Nonfarm Payrolls (NFP) report.

Gold price bullish technical setup backs the case for the emergence of some dip-buying

From a technical perspective, this week's breakout above the 200-hour Simple Moving Average (SMA) was seen as a key trigger for the XAU/USD bulls. Moreover, oscillators on the daily chart have again started gaining positive traction and suggest that the path of least resistance for the Gold price is to the upside. Hence, any subsequent slide might still be seen as a buying opportunity and remain cushioned near the $3,330-3,329 region (200-hour SMA). A convincing break below, however, might prompt some technical selling and drag the commodity further towards the $3,300 round figure.

On the flip side, the $3,363-$3,365 zone, or over a one-week high touched on Wednesday, now seems to act as an immediate hurdle, above which the Gold price could aim to reclaim the $3,400 mark. A sustained strength beyond the latter would negate any near-term negative outlook and lift the XAU/USD pair to the next relevant hurdle near the $3,435-$3,440 region.