Assuming the data is strong, gold prices may continue to rise, as investors react to the implications for short-term interest rates. While the NFP number exceeded expectations, the labor participation rate was lower than expected, indicating that the U.S. economy has not yet fully recovered from the recent recession. While the gold price is likely to move higher in the near term, it could fall as low as $1,800 an ounce if payrolls are weak.
While US jobs data aren’t directly related to the gold price, they do affect the price of the yellow metal in the short term. Historically, employment statistics move gold prices upward or downward depending on the direction of the trend in wages. However, there is no clear relationship between employment and the gold price in the long-term. Nonetheless, the US jobs report is considered an important factor for the gold market. In other words, it is important to remember that bad news for the labor market hurts the yellow metal.
The labor market has struggled to follow through after a strong rally in Jackson Hole. On Friday, the Labor Department released its non-farm payrolls report, which showed a decline in unemployment from 5.2% to 4.6%. However, economists had predicted a smaller drop to 500,000. As a result, gold futures gave back early gains, marking the end of the bullish trend.
The US jobs report was released earlier this week and came in weaker than analysts had expected. It showed a 750k increase in payrolls, but wage inflation was just above four percent on-year. It also indicated that the labor market is slowing and that wages may begin to trend downward. The UBS chief market analyst Wayne Gordon believes that gold isn’t a good inflation hedge and should fall if the employment data is poor.
As the nonfarm payrolls report came out, gold prices were broadly influenced. The Fed’s dovishness is a fundamentally positive factor for the gold market. The U.S. unemployment rate fell to 4.8% last month, nearly double the number in September. Further, as a result of the strong inflation fears, bond yields were on the rise.
A weak US jobs report was not a big surprise to gold. It was a bit surprising that the gold price rebounded after the report was released. The dollar’s strength was due to the fact that the unemployment rate was at its lowest since March. The currency had been weaker on Monday, despite the recent weak jobs report. While it is still a weaker currency, it is still a good reason to sell gold.
After the monthly US jobs data, gold prices rose slightly, while copper was down 0.6%. The People’s Bank of China’s dovish communication strategy has a positive impact on gold and the markets. It has a hawkish stance that puts bullion in the position of a bear. The stronger the dollar, the more risky it is for a strong dollar.
In the United States, gold prices rose to PS1300 an ounce last weekend. The US employment report is due to be released later today, and the ten-year US Treasury yield is key to the pricing of business and consumer loans. The ten-year US Treasury yields have been the central bank’s primary determinant of gold’s price since its adoption in 1971, and they have dropped to 1.57% per annum in the last month.
The September jobs report was a mixed bag. Some FOMC members were already ready to tighten monetary policy. Those who disagreed were left in the dark. The Fed remained silent. Traders looked at the revisions to previous reports. If the numbers are poor, they could see a more dovish tone from the Fed. A few weeks ago, gold was trading at a low level, and if it were to disappoint, gold prices could still fall.