Charlie Brooks
Sep 02, 2022 11:07
Just before the announcement of the U.S. jobs report, the spot price of bullion dipped below $1,700 for the first time in five weeks on Thursday.
The August nonfarm payrolls figure has been a concern for market players for several weeks.
The Job Openings and Labor Turnover Survey (JOLTS), which was announced on Tuesday, the ADP private payrolls report for August, which was released on Wednesday, and the weekly unemployment statistics, which was released on Thursday, each told a different narrative.
"Gold selling momentum could hit $1,650 if the nonfarm payrolls report is positive," said Ed Moya, an analyst at the online trading platform OANDA.
Sunil Kumar Dixit, the leading technical strategist at SKCharting.com, concurred.
"Traders appear to be awaiting tomorrow's NFP data before determining whether or not to break gold lower to retest the July swing low of $1,681," Dixit remarked. "If NFP statistics exceed expectations, $1,681 should give way, and metal prices should quickly approach $1,672,"
The spot price of bullion, which some traders track more closely than futures, was $1,695.90 at 15:00 ET (19:00 GMT), down $15.52 (or 0.9%) for the day. The session's low was $1,688.90.
The gold futures contract for December on the New York Comex declined by $16.90% to $1,709.30 per ounce.
In the past six months, gold has consistently declined by 12%, or an average of 2% per month.
"Gold prices are tumbling as another batch of good economic data suggests the Fed may implement additional rate hikes," said OANDA's Moya. "Gold is being used as a punching bag as rising Treasury yields have revitalized the king dollar trade." It has been nothing but negative news for gold. No reprieve for gold unless the global bond yield trend reverses."
U.S. Treasury yields rose for the second consecutive day, while the Dollar Index touched its highest level since June 2002, a 20-year high of 112.
The Fed closely monitors all labor data in order to gauge the labor market's susceptibility to rising interest rates.
Since late last year, U.S. inflation has been at four-decade highs, although the widely followed Consumer Price Index declined from 9.1% to 8.5% on an annualized basis in July.
The Federal Reserve has vowed to raise interest rates as much as is required to achieve its annual inflation objective of 2%. Gold is resistant to interest rate hikes.
A week's worth of inconsistent U.S. job data has left experts concerned about the future of the labor market.
The Labor Department said on Thursday that new claims for unemployment insurance fell to two-month lows last week, allowing the Federal Reserve to continue raising interest rates to combat inflation, which remains near four-decade highs.
The weekly unemployment results were disclosed before the more critical August nonfarm payrolls data, which were announced on Friday. Economists anticipate that 300,000 payrolls were added in August, compared to 528,000 in July, keeping the unemployment rate at 3.5% for a second straight month. The Fed considers full employment to exist when the unemployment rate is at or below 4%.
In April 2020, following the COVID-19 outbreak, the unemployment rate among Americans reached a record high of 14.8%, with the loss of nearly 20 million jobs. Since then, hundreds of thousands of jobs have been added each month, with the trend continuing in July despite a negative 0.6% increase in the second quarter gross domestic product this year, which followed a negative 1.6% decrease in the first quarter that constituted a recession.