US-Vietnam trade agreement drives risk appetite higher; gold faces pressure while non-farm data becomes the focus

Precious metals continue to face multiple pressures this week. The trade agreement reached between the US and Vietnam has significantly eased market concerns over prolonged trade tensions, thereby weakening the demand for safe-haven assets. Meanwhile, the modest strengthening of the US dollar has further added downward pressure on gold. However, market expectations of a dovish Federal Reserve (Fed) still provide some support for the commodity.

Optimistic Trade Outlook and Dollar Rebound Form a Double Drag

On Wednesday, President Trump announced that the US had reached a trade agreement with Vietnam, reducing import tariffs on Southeast Asian goods to 20%, while Vietnam will gain tariff-free access to the US market. This positive news sparked an increase in market risk sentiment. At the same time, US and Indian negotiation teams are also striving to reach a tariff reduction agreement before the July 9 deadline, further boosting investor confidence.

Against this backdrop, gold prices (XAU/USD) faced selling pressure during the Asian trading session, rebounding from a one-month low earlier in the week and now oscillating after three days. Despite slow progress in negotiations with Japan, trade-related uncertainties remain, but these are not sufficient to provide strong support for precious metals. The modest appreciation of the dollar has become another key factor weighing on non-yielding assets.

Labor Market Pressure Reinforces Rate Cut Expectations, Non-Farm Payrolls Key Focus

Economic data signals remain weak. The Automatic Data Processing (ADP) June employment report showed that US private sector employment declined for the first time in over two years, decreasing by 33K month-over-month, with a revised previous month increase of 29K. This data corroborates the previous day’s Job Openings and Labor Turnover Survey (JOLTS), reflecting a continued weakening of US employment momentum.

Traders generally expect these weak labor market signals to prompt the Fed to initiate a new rate cut cycle earlier. The market is currently pricing in nearly a 25% chance of a rate cut at the July 29-30 meeting, with a nearly certain 25 basis point cut in September, and two more rate cuts expected before the end of the year. As the non-farm payrolls figure approaches, traders are closely watching whether this indicator will further confirm labor market deterioration, thereby strengthening dovish Fed expectations.

This rate cut outlook should limit the dollar’s rebound from its 3.5-year lows and prevent further gold losses.

Technical Outlook Shows Bullish Tug-of-War, Key Levels Test Buying Resilience

From a technical perspective, the breakout above the 200-hour simple moving average (SMA) this week is seen as an important bullish signal. The oscillator on the daily chart has re-accumulated positive momentum, indicating that the shortest path of resistance for gold remains upward. Therefore, any dips in gold prices could still attract buying interest, with the $3,330-3,329 zone (200-hour SMA) serving as a major support. If this level is effectively broken, technical selling could emerge, pushing the commodity toward the $3,300 round figure.

On the upside, the $3,363-$3,365 area (the high reached on Wednesday, over a week ago) now constitutes direct resistance. A breakout above this zone would set the next target at the $3,400 round figure. Continued upward movement could clear recent negative expectations and push XAU/USD toward the next key barrier at $3,435-$3,440.