Gold Price Analysis; Gold Shoots To Fresh Three-Month Tops on Disappointing US Jobs Report

Gold Price Analysis; Gold finally broke out of its intraday consolidative trading range and surged to near three-month tops, around the $1,843 region during the early North American session.

Gold Price Analysis; Gold Shoots To Fresh Three-Month Tops

The US dollar witnessed some aggressive selling in reaction to the disappointing US NFP report, which showed that the economy added only 266K jobs in April as against consensus estimates pointing to a reading of 978K. Adding to this, the previous month’s reading was also revised down to 770K from 916K reported previously. This was accompanied by an unexpected rise in the unemployment rate to 6.1% from 6.0% in March.

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The data reaffirmed market expectations that the Fed will keep interest rates near zero levels for a longer period. This was further reinforced by a sharp fall in the US Treasury bond yields, which was seen as another factor that provided a strong lift to the non-yielding Gold. Bulls seemed rather unaffected by the underlying bullish sentiment in the financial markets, which tends to drive flows away from traditional safe-haven assets, including gold.

Gold Price Forecast

Update: Gold (Yellow Metal) is holding the higher ground, closing in on the three-month highs of $1822 reached earlier in the Asian session. The price of gold is up nearly 3% this week, on track to register the best week in six months. The bearish undertone in the US dollar and Treasury yields, especially after the latest dovish comments from the Fed policymakers, continue to offer support to gold.

Investors eagerly await the US NFP report for the next direction in gold prices. Only an NFP blowout could stem the upsurge in gold, as it would rei-ignite the Fed’s tapering expectations. The headline payrolls are seen rising by 978K in April vs. 916K recorded in March.

Gold Report: Gold Forecast: Bullion Depends on US T-bond yields

Update: Gold (Yellow Metal) bulls catch a breather around $1,820, up 0.24% intraday, after printing the fresh high since mid-February ahead of Friday’s European session open. Gold buyers earlier cheered the hopes of extended monetary policy, as suggested by the Fed policymakers, as well as the faster coronavirus (COVID-19) vaccinations due to the latest drive to waive vaccine patents. However, the risk-on mood fades as traders from Brussels turn cautious ahead of the key US Nonfarm Payrolls data.

Gold recently takes clues from the market optimism and hence a pullback in stock futures as well as the US 10-year Treasury yields, seem to have weighed on the prices. Even so, gold buyers remain hopeful as the US employment report for April is likely to print strong job numbers.

Update: Gold (Yellow Metal) is consolidating near three-month highs of $1818 so far this Friday, having witnessed a blistering rally finally above the $1800 level on Thursday. The main catalyst behind gold’s over 1% surge was the dovish Fed expectations. Markets continue to believe that the Fed will continue with its accommodative monetary policy stance, despite the strengthening economic recovery.

US stocks rose on expectations of the Fed’s easy policy for longer while the Treasury yields tumbled alongside the dollar. The price of gold ignored strong US Jobless Claims, as all eyes remain on Friday’s NFP data, which is expected to show a rise of 978K last month. Monthly 50-SMA near $1835 could keep a lid on gold prices.

Will gold price go down in 2021?

Gold prices were well and truly bid on Thursday as the US dollar took a trip to the downside.

Gold had added some 1.57% by the close of play on Wall Street after travelling from a low of $1.782.04 to break the psychological $1,800 level and to go on to score a high of $1,818.13.

The US dollar slipped to its lowest point in three days as global market risk appetite improved.

The DXY was losing around 0.4% by the close after falling from a high of 91.37 to a low of 90.88. 

US jobs data was the focus this week. 

Fewer Americans filed new claims for unemployment benefits COVID-19 vaccination efforts and massive amounts of government stimulus led to a further reopening of the economy.

With that being said, Federal Reserve speakers have continued to downplay the risks of higher inflation this week. 

Ahead of Friday’s Nonfarm Payrolls, the data on Thursday proved that the number of jobs cut by US companies fell 25% MoM in April and was down a huge 96.6% for the year. 

Initial Jobless Claims fell to the lowest level since mid-March 2020. Markets are expecting that core inflation will likely consistently exceed the Fed’s target over the next few years but the Fed is not expected to begin hiking interest rates until 2023.

NFP matters for gold market

For the day ahead, analysts at Westpac see ”1.1mn new jobs and believe further upward revisions to prior months could also be seen.”

The analysts argue that this should see the unemployment rate fall to 5.8%.

Moreover, they said average hourly earnings should edge up a more muted 0.1%, given the remaining slack in the labour market. 

Meanwhile, it may take a surprise in the data to really convince the market that the Fed will taper or raise rates sooner than they would like to.

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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