- Gold price trades sideways as the focus shifts to key US labor market data.
- Job growth is expected to have slowed in October due to the United Auto Workers strike.
- An upbeat US labor market report would likely increase concerns over inflation pressures.
Gold price (XAU/USD) struggles for direction as investors await the United States Nonfarm Payrolls (NFP) and ISM Services PMI data for October. The downside for Gold price remains cushioned due to persisting geopolitical tensions in the Middle East and expectations that the Federal Reserve (Fed) will keep interest rates elevated for a significantly longer period.
Economists see slower job growth in October as at least 30K workers of the United Auto Workers (UAW) union went on strike against Detroit’s “Big Three” car makers. Apart from the headline figure of job growth, investors will also pay attention to the Average Hourly Earnings data, which will provide guidance on consumer spending and inflation. Strong wage data and healthy payrolls could elevate bets for one more interest rate increase from the Fed.
Daily Digest Market Movers: Gold price awaits crucial US data
- Gold price struggles for direction as investors await the US NFP data and fresh developments in the Israel-Palestine war for further guidance.Â
- The precious metal consolidates in a narrow range below $1,990.00 ahead of the US employment data for October, which is likely to shape the interest rate outlook for the year-end.
- US employers are expected to have added 180K new jobs in October, a figure close to the six-month average. In September, job creation was surprisingly higher at 336K.
- The Unemployment Rate is expected to remain steady at 3.8%. Economists expect that job growth slowed in the manufacturing sector in October due to strikes by the United Auto Workers (UAW) union against Detroit’s “Big Three” car makers.
- Earlier, the US Bureau of Labor Statistics (BLS) reported that more than 30K UAW workers were on strike in October.
- Apart from the employment numbers, investors will focus on the Average Hourly Earnings, a gauge of wage growth.Â
- Economists have forecasted that monthly Annual Hourly Earnings grew at a higher pace of 0.3% against 0.2% the advance recorded in September. On an annual basis, earnings are expected to have risen at a slower pace of 4.0%, against the former reading of 4.2%.
- A stable or stubborn wage growth would warrant a persistent consumer inflation outlook as higher purchasing power by households will keep overall spending at healthy levels. Â
- In addition to employment data, the US Institute for Supply Management (ISM) Services PMI for October will be keenly watched. Services PMI, which gauges activity in the US service sector – a sector that accounts for two-thirds of the US economy – is seen declining to 53.0 from 53.6 in September.
- The near-term demand for bullions seems upbeat as investors hope that the Federal Reserve is done hiking interest rates after keeping them unchanged in the range of 5.25%-5.50% on Wednesday for the second time in a row.
- However, Fed Chair Jerome Powell kept expectations of more interest rate hikes alive as strong retail demand and upbeat labor market conditions could keep inflationary pressures persistent.Â
- The US Dollar Index (DXY) discovered an intermediate support near 106.00 as investors turned cautious ahead of the labor market data. 10-year US Treasury yields rebound to near 4.67% but remain on the backfoot on expectations that the Fed has concluded its rate-tightening campaign.
- As per the CME Fedwatch tool, more than 80% of traders bet that monetary policy will remain unaltered for the rest of the year.
- Meanwhile, deepening Middle East tensions keep the appeal for Gold upbeat. The Israeli army has surrounded Gaza and is prepared for the ground assault.Â
- US Secretary of State Antony Blinken has arrived in Israel with the aim of negotiating a temporary pause in the ground invasion plan by Israeli troops to confirm the secure dispatch of humanitarian aid and help with hostage negotiations.
Technical Analysis: Gold price consolidates around $1,990
Gold price exhibits a lackluster performance around $1,990.00. The precious metal has been consolidating in a range of $1,970-$2,010 for the past five trading sessions. A volatile action in Gold is highly likely after the release of the US labor market data.Â
On a broader note, the trend for Gold is bullish as the 20-day and 50-day Exponential Moving Averages (EMAs) are sloping higher. Momentum indicators also oscillate in the bullish range, indicating strength in the upside momentum.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
