Gold entered a tight range on Friday as cautious investors positioned themselves for US jobs data. However, the bright metal posted its second weekly gain on expectations of a slowdown in the pace of US rate hikes. Analysts interpret the market and share their forecasts.
How will the US NFP data affect gold prices?
Spot gold hit $1,804.46, its highest level since Aug. However, it later declined and closed the week at $1,797.98. U.S. gold futures were down 0.2% at $1,812.20. Ricardo Evangelista, senior analyst at ActivTrades, commented ahead of these US NFP data:
Disappointing data on the downside, which could further reduce the scope and scale of the Fed’s tightening move, will likely create further dollar weakness. Therefore, it will support gold prices. However, it will put pressure on a surprisingly high number of new jobs, which will encourage hawks in the Fed and create upside for the dollar.
OCBC FX strategist Christopher Wong makes a similar comment with Evangelista:
Wage growth and softer data on NFP would be a situation where all stars align for further weakening of the dollar. So this will be more beneficial to gold. However, a bullish stop is possible for an upside surprise on the report, especially for gold, which is trading near the key resistance level.
Meanwhile, the U.S. Department of Labor released its nonfarm payroll (NFP) data on Friday. The US created 263,000 new jobs in November, above expectations of 200,000. Also, this indicates a strong hiring rate historically. Therefore, the second scenarios of Evangelista and Wong remain valid.
“Critical level for gold: $1,805”
According to Kinesis Money analyst Rupert Rowling, the fact that gold made significant gains in November and then carried that momentum into December shows the depth of support established for the shiny metal.
Hareesh V, head of commodity research at Geojit Financial Services in Kochi, India, says the dollar has largely recovered after Fed Chairman Jerome Powell’s comment on Wednesday. He also states that this supports the lure of gold. In this context, the analyst makes the following statement:
It is possible that the $1,805 level could act as a close resistance for gold. A break above this is likely to trigger new rallies.
How did the market see the US NFP data?
Senior analyst Jim Wyckoff says the stronger-than-expected jobs report has some ‘higher inflation effects’ in a daily report. Hourly wages also rose 0.6% last month to an average of $32.82. It was also the biggest increase in 13 months. Wyckoff interprets the data and its implications as follows:
The market saw these figures hot. Taken overall, this report is very strong for the Fed’s liking. It also indicates that the Fed will be reluctant to backtrack too much on its aggressive monetary policy tightening thus far.
In a market review, AvaTrade chief market analyst Naeem Aslam highlights the following:
Powell stole the US NFP thunder earlier this week. Also, that’s what traders were thinking. However, today’s data confirms that there is no shortage of thunder or drama when it comes to US economic data.
“There are signs of buying fatigue for gold”
cryptocoin.comAs you follow, gold rose above $1,800 for the first time in four months. However, TD Securities economists expect the buying appetite for the yellow metal to subside. They explain their views as follows:
Yesterday’s sharp rally pushed gold prices above several key triggers. Thus, the trend follower accelerated the closing of the short position. Later, CTA trend followers will start adding short positions again in this session. At this point, gold’s positioning risks are no longer on the upside. Also, a rally north of $1,830 only indicates marginal CTA buying from current position levels. So we’re seeing the first signs of buying fatigue in gold.
“It is possible for gold to lose some of its gains again”
Gold price rose more than 8% in November. However, the current rally in the gold market is likely to lose momentum ahead of the central bank meetings scheduled for next week, according to Commerzbank strategists. For these predictions, strategists make the following statement:
Precious metals have recently gained from the Fed’s expectation of more moderate rate hikes, thanks in part to a weakening US dollar. However, it is doubtful whether this activity will continue until the end of the year. Gold is likely to lose some of its gains ahead of next week’s central bank meetings. Meanwhile, Bloomberg has reported no further sales of the ETFs it tracks since at least mid-November. Despite this, especially long-term financial investors are still hesitant.
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