[ad_1]
(Kitco News) With gold unable to recover despite a disappointing US employment report in September, analysts are looking at sticky gold price levels.
The September US employment report surprised on the downside with just 194,000 jobs added against the expected 500,000. This is a big failure given that Federal Reserve Chairman Jerome Powell needed a “reasonably good ratio” to start declining as early as November.
“We had a big hiccup on the number of jobs. The bad news is good news for gold. That’s because the market thinks the Fed can’t get so aggressive next month with a timetable of. lower or higher rates in the future, ”Frank, senior market strategist at RJO Futures. Cholly told Kitco News. “It comes down to the fact that the Fed is not yet in a position to remove the punch bowl.”
In response to the jobs report, gold jumped $ 20 to a daily high of $ 1,781. However, gold eventually gave up on all of its gains as US Treasury yields began to climb.
“As has been the case in recent months, gold prices have been very sensitive to economic data,” said Everett Millman, precious metals expert at Gainesville Coins. “The two areas that drive safe haven demand away from gold are the bond and crypto markets.”
With worsening economic data, gold may experience a change in sentiment. But it must find the appeal of new buyers as a hedge against inflation, which so far has been the US dollar and bitcoin.
“The economic data seems to be trending down. Inflation is still pretty high. This is all pretty positive for gold. Particularly because we are now seeing inflation outside of the United States, it seems like this train is not going to stop running even though Powell says the price increases are transient, ”Millman told Kitco News.
Will Powell keep his slender November stance?
The critical question for gold is whether or not Fed Chairman Jerome Powell will make the cut in November.
A few weeks ago, Powell said the tapering test was “almost satisfied.” But is this still the case?
“Powell got into a bind with these comments. The reduction seems unlikely to happen in November, given the number of jobs. They also can’t raise interest rates whenever they want if the data continues to be bad. If the Fed cannot meet its timetable and is forced to continue supporting markets longer than expected, that does not indicate a strong economy and will stimulate demand for gold as a safe haven, ”Millman explained.
The risk to gold here is that the Fed chooses to stick to its cut schedule for the sake of transparency, Cholly said.
“Gold could continue to move sideways. Even though we had a big job shortage, yields continue to climb. The Treasury market is telling us that the Fed will meet its deadlines. The Fed is worried about being transparent . And if they have given us any indication that they are going to decrease, they will be inclined to follow it, “he said.
Key gold levels to watch out for
Gold will fail to build bullish momentum unless it closes above Friday’s high of $ 1,781 an ounce, Cholly said.
“It’s all about the levels on a chart. This morning December gold hit $ 1,782. Coincidentally, $ 1,781 is the 50-day moving average. If the market could handle a close of $ 1,781 or more, that would be good for gold bulls. Then we can start talking about $ 1,800, “he said.
But for now, the market has rejected that level and gold has returned to a stable level that day at $ 1,758.60 an ounce. Meanwhile, the $ 1,720 level continues to provide support, Cholly added.
Millman said he would not rule out a move to $ 1,800 next week if gold attracts safe-haven interest. “Lately I’ve been down in metals because I think the US dollar and risk appetite have been strong. But the long pullback that the gold market has seen is a temporary hiatus. think about $ 1,800 for next week, ”he said.
Millman is monitoring any additional comments from Fed members to clarify what September’s jobs numbers mean for the central bank.
Data to monitor
One of the important publications to watch for next week will be the minutes of the FOMC meeting on Wednesday in September.
“Gold will react if there are adjustments in the language surrounding the cut. If it looks like the Fed is trying to push back that timeline,” Millman noted.
Additionally, markets will examine the US CPI report on Wednesday, with market consensus calls predicting that the annual inflation rate will remain at 5.3% in September.
On Thursday there are jobless claims and PPI reports. And on Friday, markets will get a sneak peek at the latest retail sales figures.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.
[ad_2]
Source link