A surprisingly strong jobs report came in from the US on Friday. According to analysts, therefore, the Federal Reserve will not return from its aggressive tightening cycle in September. Therefore, this will hurt the gold price in the short run. Markets will focus on the highly anticipated inflation figures next week.
Frank Cholly: The idea that the Fed would be aggressive didn’t help gold
cryptocoin.comAs you can follow, the US economy added 528,000 jobs in July, significantly exceeding the expectations of 250,000. Gold, on the other hand, lost 1% in response to this development. Frank Cholly, senior market strategist at RJO Futures, commented:
Today’s employment numbers are surprising. The idea that the Fed might be aggressive in raising interest rates didn’t help gold prices.
Edward Moya: Gold will only struggle here
Last week, there was a lot of confidence in the market that the Fed could come back early from excessive rate hikes due to the slowing economy. But that all changed this week, especially with the strong jobs report, says OANDA senior market analyst Edward Moya. The analyst comments:
It’s a game changer. The amount of confidence that the Fed could return was quite high. Some even expected it to happen as early as September. The focus now shifts to whether the Fed should be more aggressive. Gold will only struggle here as expectations for a rate hike next week will be bolstered.
“It will be difficult for gold to continue on its way”
Edward Moya points out that the market’s repricing of Fed expectations is challenging for gold. In this context, the analyst makes the following statement:
This is especially true after gold tried to break above $1,800 and failed this week. It looks like gold will try to stabilize on this. It will be difficult for gold to continue on its way. It went from $1,700 to $1,800 in a one-way move. He looks a little tired here.
Important technical levels for gold prices
However, Edward Moya adds that the pullback of gold on Friday does not mean a significant sell-off to $1,700. “The $1,750-1,770 region is a good support level for gold,” the analyst says.
Technically speaking, Cholly thinks many buyers are coming in at $1,735-1,750. On the resistance side, it is critical for gold to break above $1,800. This marks the time when Cholly is getting more bullish. The analyst points to the following levels:
I don’t think we’ll see $1,700 again because of the support there. However, gold needs to close above $1,800 for the bulls to come back. And if gold manages to break out of the $1,800-1,812 level, buying will become aggressive. We shouldn’t have any problems reaching $1,850-75. This is where momentum comes into play.
“This situation is never good for interest-free gold!”
Meanwhile, next week most of the attention will be on the US July inflation report. Economists predict that annual CPI, which accelerated to 9.1% in June, will reach 8.7%. According to economists, any surprise above these expectations will be negative for gold. Edward Moya explains his views on the subject:
Next week it will all be about inflation. Price pressures can be stubbornly hot. This indicates that Treasury yields may rise further and the US dollar will continue to do well next week. Markets will be nervous here that sales in the bond market could intensify. This is never good for interest-free gold, either.
Everett Millman: Any good news will raise the dollar
Meanwhile, analysts estimate that if inflation comes in hotter than expected, markets will predict a 75 basis point increase in September. He even warns that he will start pricing at a 100 basis point move, Gainesville Coins precious metals expert Everett Millman said any positive macro news at this point is bad news for the market as there are expectations about what the Fed will do in response. The expert details his views as follows:
The stronger the economy looks, the freer the Fed is to be more aggressive in rate hikes. For example, if things get tough, the Fed will be more inclined to spin and slow, or even pause, rate hikes. However, any good economic news raises the dollar.
Millman also notes that datasets are frequently revised in the months that follow. It also reminds us that this may have an impact on the strong employment figures in July and even the upcoming inflation figures.
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