Key Points
- Volatile week to end with a bang.
- Weaker NFP ahead?
- Gold stuck in a range.
- Gold to surge today?
Weekly Recap
It has been another brilliant week of trading in the markets. The volatility began when the ISM Services PMI recorded its lowest reading (48.8) since June 2020 and, therefore, showed “contraction.” On the same day, the ADP Non-Farm Employment Change figure was weaker than expected at 150,000.
The FOMC minutes and Fed Chair Powell’s speech both indicated that they recognised cooling inflation. However, it was repeatedly said that more evidence is needed to gain confidence in cutting rates. The markets, not for the first time, don’t believe this, which is evident in the stock market rise and dollar slump. The week is set to end with a bang…
Weaker NFP ahead?
On the first Friday of every month, the U.S. Department of Labor’s Bureau of Labor Statistics releases an employment statistics report from the previous month, and it loves to cause shockwaves throughout the markets. So, anyone who was hoping for a quiet end to the volatile 48 hours we have had can be mistaken. Today is US Non-Farm Payrolls Day!
The message from the jobs number has been clear: There is underlying strength in the US labor market. From December to April, the figure was quite considerably above the forecast. This changed in May when a softer reading of 175,000 was released, but then it snapped back to 272,000 last month. Interestingly, it is not uncommon for the previous figure to be revised down, so watch out for this today. The forecast is for 191,000, with a 4% unemployment rate. Any figure below 180,000 is likely to continue the newly forming bullish trend in Gold in the short term, and this is the base case for today.
Will Gold Surge Today?
After an astonishing run higher in gold prices in the first half of the year, the price has now paused and formed a wide range between $2286 and $2450. There are still plenty of opportunities within this range, and although it is unlikely to see a break out of it today, NFP will have a say in the short-term direction of this popular commodity.
On the H4 chart, you can see gold prices have been rising steadily this week, and that is the market’s pricing in all of the weaker data coming out of the US in the last 48 hours. Heading into NFP, gold prices are currently in overbought conditions according to the RSI indicator and knocking on the door of a key bearish order block.
If NFP comes in weaker, with 4% or higher unemployment and a downward revision to last month’s figure, gold prices could break above this bearish order block and start a move up to the top of the range at $2450.
However, considering the price’s overbought nature, it may only take a mildly stronger report for some of the tension to be released. In this situation, we could see gold begin a move down the sell-side liquidity and fair value gap at $2310 but stay within the range. From there, we could see some significant support.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
