The weekend ended with fireworks after a record-breaking US jobs report. That’s why there is never a dull momentum in the financial markets. On the other hand, there is not much good news for gold investors in the strong business report. Meanwhile, geopolitical risks stemming from tensions between China and the US are weakening the dollar. This provides support for the gold price.
Strong business report not much good news for gold investors
Market analysts started the week by talking about the potential return of the Federal Reserve’s monetary policy next month. These expectations were wiped from the board with just one data point. Data from the US Department of Labor showed that more than 500,000 jobs were created in July, significantly exceeding market expectations. At the time of the report, economists were looking for 250,000 job gains.
Unfortunately, there isn’t much good news for gold investors in the stellar business report. Wages were also higher than expected, up 0.5% last month. Fees have increased by 5.2% in the last 12 months. This data is considered inflationary in a typical economic environment. Therefore, it should be positive for gold. However, this environment is not normal. Solid employment numbers mean the Fed can continue to raise interest rates aggressively without worrying about throwing the economy into a recession. The wage figure will also reinforce the Fed’s view that inflation is still a major issue.
We are still about two months away from the Fed’s next monetary policy decision. Markets now see an almost 70% chance for another 75 basis point move. The day before the employment report, markets saw only a 30% chance of a rate hike.
“There is still much more to the price of gold than interest rates”
The short-term contraction in the gold market caused by the Fed last week has evaporated rapidly, at least for now. Making matters worse for gold, the Federal Reserve isn’t the only central bank to raise interest rates aggressively. Last week, the Bank of England raised interest rates by 50 basis points, the first half-point move since gaining independence from government in 1997. The Bank of England also said the British economy is facing a prolonged recession from this year as inflation still has not peaked.
But as many analysts have pointed out, there is still much more to gold than interest rates. Gold struggled for most of the summer However, analysts say the strong risk premium in the market provides solid support.
Premium due to China-US tensions comes into focus
By the way cryptocoin.comAs you follow, relations between China and the USA continue to deteriorate. That’s why this premium has come into focus again. Nancy Pelosi, Speaker of the US House of Representatives, visited Taiwan this week, raising China’s anger. In response to its visit as part of its Asia tour, China has launched the largest ever military exercises in the Taiwan Strait.
These new tensions will not disappear anytime soon. It will also not contribute to economic uncertainty, including the potential for a recession, a government debt crisis, and an energy and food crisis.
Gold price enjoys some safe-haven support
Gold price rose to $1,794.23 earlier this week. As support rebounded, it surpassed 6.7% of yearly lows. Bullion rose 1.5% on Thursday. The repercussions of US House of Representatives Speaker Nancy Pelosi’s visit to Taiwan kept markets tense for most of the week. After the trip ended, the anxiety subsided a bit. Analyst Zain Vawda sees a further strengthening of the demand for shelter if we see a continued escalation in tensions. Also, according to the analyst, gold bullion would likely be one of the biggest winners.
On the other hand, ongoing geopolitical risks weaken the dollar. The gold price is also benefiting from falling US bond yields and some port support. Bull comments from Fed officials indicate that the central bank will continue an aggressive fight to cool rising inflation. These comments had little impact on the gold price as safe-haven demand continued.
“Gold price outlook mixed after exploding NFP report”
US employers added more than double the estimated number of jobs. This, in turn, eased recession concerns. He also pointed out that the Fed will continue to increase interest rates aggressively to avoid inflation. Treasury yields rose on bets that the Fed will continue to raise rates aggressively. The analyst makes the following assessment:
The strong NFP report is likely to lead the Fed to continue its front-loading raising plans. But these are crossing a cliff that should ease the concerns of the economy. This is likely to help stabilize risk appetite in the near term. It is possible that this will cause the demand for safe haven to soften and gold to fall.
We’ll get a better picture of the inflation profile next week when the U.S. Bureau of Labor Statistics releases the July consumer price index, with the Fed reaffirming its closeness to data-driven decisions. CPI is expected to increase by 0.3% monthly. Moreover, the annual rate is expected to decrease to 8.9% from 9.1% in the previous month.
Important technical levels for gold price
The analyst points out the following technical levels for the yellow metal. With the market reaction following the NFP business report, gold saw a sharp drop from $1,790 to $1,764 before rising once again. While we were trading between the 20- and 50-SMA, the 50-SMA provided resistance. The daily candle looks like it will give more bearish signs as it starts the new week. The key psychological level of $1,800 rests just above this week’s highs.
Investors and, more importantly, the Fed continue to follow the data closely. For this reason, the sensitivity changes after each statement. Meanwhile, markets are still waiting for next week’s inflation data at uncomfortably high levels. The analyst comments:
In this case, it’s possible that we could see a resurgent dollar for the precious metal, which could lead to further declines.
Contact us to be instantly informed about the last minute developments. twitter‘in, Facebookin and InstagramFollow and Telegram and YouTube join our channel!
Disclaimer: The articles and articles on Kriptokoin.com do not constitute investment advice. Cryptokoin.com does not recommend buying or selling any cryptocurrencies or digital assets, nor is Kriptokoin.com an investment advisor. For this reason, Kriptokoin.com and the authors of the articles on the site cannot be held responsible for your investment decisions. Readers should do their own research before taking any action regarding the company, assets or services in this article.
Warning: Citing the news content of Kriptokoin.com and quoting by giving a link is subject to the permission of Kriptokoin.com. No content on the site can be copied, reproduced or published on any platform without permission. Legal action will be taken against those who use the code, design, text, graphics and all other content of Kriptokoin.com in violation of intellectual property law and relevant legislation.