The US jobs report, which was the focus of the markets, came in unexpectedly strong. This, in turn, eased recession concerns. It also debunked speculation that the Federal Reserve would move away from aggressive monetary policy tightening. Following this development, gold prices depreciated by about 1% on Friday. Analysts interpret the market and share their forecasts.
Bart Angel: This is not a good story for gold!
Spot gold closed the day down 0.92% at $1,774.74 after falling as much as 1.5% in the early hours of Friday. U.S. gold futures, on the other hand, were last traded at $1,791.2, down 0.87%. Bart Melek, head of commodity strategy at TD Securities, comments:
Gold had recently rallied on the idea that the Fed would move from hawk to dove. However, employment data shows that the US economy is strong. It is possible that this will cause the Fed to become more aggressive. That’s not a good story for gold either.
“The next catalyst for gold prices: US CPI data”
The dollar index rose 0.8%, making gold more expensive for offshore buyers. US Treasury rates continued to rise after the data. Meanwhile, physically, gold premiums in China rose this week as safe-haven demand fueled by escalating tensions with the US and Taiwan. Bart Melek, referring to consumer price data, adds:
If there is a pop-up on geopolitical issues, this will help the bottom. But it will not be a permanent rally. The next catalyst for gold prices will be the US CPI data next week.
Rupert Rowling: Gold gains will be capped at $1,800
An environment marked by high interest rates harms bullion as it does not yield interest. US employers hired far more workers than expected in July. In addition, the unemployment rate fell to 3.5%, which was the pre-pandemic low. In a note, Kinesis Money market analyst Rupert Rowling underlines:
The positive employment picture has given the Fed more room to raise interest rates without risking a recession in the economy. Therefore, gold’s upside gains will likely be capped at $1,800.
Rhona O’Connell: Gold likely to see technical consolidation
cryptocoin.comAs you follow, gold has surpassed a one-month high ahead of Friday’s US labor market data. However, tensions over Taiwan and low US interest rates kept bullion bullish for the third week in a row. StoneX analyst Rhona O’Connell comments:
The increased geopolitical risk over the Taiwan Strait is likely to be temporary. But it definitely caught the attention of the markets. It is possible that gold prices will see some technical consolidation after the recent sharp moves.
Lukman Otunuga: Golden bulls can draw strength from them!
Yields on US 10-year Treasury bills fell. This reduced the opportunity cost of holding interest-free gold. However, the dollar rose and put pressure on bullion. FXTM analyst Lukman Otunuga comments on the developments as follows:
A strong jobs report is bad news for gold, given how it will increase the likelihood of a more aggressive rise from the Fed. Gold bulls may be fueled by recession fears, ongoing geopolitical risks in Europe and tensions between the US and China.
Gold technical analysis: Gold markets enter resistance
Market analyst Christopher Lewis analyzes the technical outlook for gold as follows. Gold markets spent most of the week trying to recover. However, the $1,800 level seems to continue to offer a large amount of resistance. In fact, it is worth noting that there is a lot of supply at the $1,815 level. That’s why we need to rise above them all to truly ascend. Trying to create a little shooting star shows we’re ready to step back a bit. Which makes sense considering how much we’ve been up lately.
This does not necessarily mean that gold will collapse. However, the Federal Reserve is likely to continue tightening its monetary policy. This works against the yellow metal. Because interest rates will continue to rise. The job count for Friday was announced as more than half a million jobs added. Therefore, it is quite logical for interest rates to increase, as the Fed cannot put forward the argument for slowing inflation. As long as they continue to do their best to fight inflation, this will be against gold. Because interest rates will be higher. So instead of storing gold, you can get a return on paper.
The second derivative is the strengthening of the US dollar. This of course means that it will need less than those US dollars to buy gold. I’m not necessarily calling for some kind of meltdown. But after this point, I think a pullback perhaps to the $1,750 level, where we’ve seen some resistance before, is quite logical.
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