Gold could have strongest week since March as investors focus on US jobs data.

Oct 7, 2022
VOT Research Desk

Key News – Insights and Analysis

With the US non-farm payrolls data coming out, the gold price rise stalls. Due to the impact of the Fed, expect increased volatility in the jobs data. XAU/USD is still primarily in a downtrend; keep an eye on critical resistance.

Investors are eagerly awaiting the U.S. jobs report to gauge the Federal Reserve’s plans for rate hikes, so gold prices held steady on Friday but were on track for their biggest weekly gain since March.

As of 0651 GMT, spot gold was unchanged at $1,710.09 per ounce. This week, the dollar and Treasury yields falling from multi-year highs have helped prices rise by about 3%.

At $1,716.90, U.S. gold futures fell 0.2 percent.

After rising overnight, benchmark U.S. yields held steady and the dollar index fell 1%.

Gold prices fell slightly in the last 24 hours as the strong upward momentum of this week slowed significantly. The XAU/USD pair has had its best five-day performance since February thus far this week, rising by around 3%. When Russia invaded Ukraine at that point, people fled to the yellow metal. The recent rise in gold probably reflected a slight cooling of hawkish Federal Reserve rate hike bets.

On Thursday, a slew of Fedspeak reaffirmed the central bank’s determination to combat inflation, which subsided this. Prior to Friday’s highly anticipated US jobs report, investors probably were reluctant to commit to directional bias.

In September, the country is expected to add about 255 thousand non-farm payrolls, down from 308 thousand in August. In the meantime, both the unemployment rate and the labor force participation rate—6.24% and 3.7%, respectively—are anticipated to remain unchanged.

Given that traders are attempting to price in either a 50 basis point hike or a 75 basis point hike in November, recent economic data surprises have heightened market volatility. Those estimates could easily be off by 50 basis points with a more moderate outcome. The US Dollar and Treasury yields would likely suffer as a result, favoring gold. However, the skew may be unexpectedly positive. Since June, the US-tracking Citi Economic Surprise Index has been rising. This suggests that economists undervalue the economy’s health and vitality.

U.S. jobs data will shape expectations about how much more tightening is yet to come from the Fed in the coming months.

After the data, it is possible for gold to correct down to $1,680.
 

Economists anticipate that 250,000 new jobs were created last month, according to the nonfarm payrolls report due at 1230 GMT.

Expectations of a slowdown in the Fed’s rate-hike pace were stoked earlier this week by data showing a decline in job openings in the United States and weaker manufacturing as well as an Australian central bank rate hike that was smaller than anticipated.

However, as Fed officials reaffirmed their commitment to limiting high inflation, those hopes were dashed.

Even though gold is thought to protect against inflation, the rapid tightening of monetary policy in the United States has made the non-yielding bullion less appealing while strengthening the dollar.

Daily Indicators