Non-agricultural data in line with expectations, gold prices fluctuate at low levels

The U.S. dollar index fell about 0.1%, making gold cheaper for overseas buyers, while U.S. Treasury yields also fell on the day; in the physical market, gold premiums jumped in top consumer China, while falling local prices in India boosted demand. The employment data was very close to market expectations. Markets see this as a good Blonde report, neither showing weakness, but not too strong to prompt the Federal Reserve to be more aggressive. Gold appeared to be getting some respite as it rebounded on short covering.

According to data from the U.S. Commodity Futures Trading Commission (CFTC), as of August 30, the speculative net long position in COMEX gold futures decreased by 9,599 contracts to 20,726 contracts, a five-week low. Speculators have increased their net-long bets on the dollar in the latest week. The net long dollar position rose to $14.21 billion in the week ended Aug. 30 from $13.79 billion the week before. The dollar retreated after largely in-line U.S. jobs data, but gold remained on track for a third straight weekly loss amid pressure from a high interest rate environment.

The US added 315,000 non-farm payrolls in August, an increase of 300,000 slightly higher than the expected value, and the previous value was slightly revised up to 528,000; the unemployment rate rose 0.2 percentage points from the previous value and the expected value to 3.70%; The value was 5.20%, which was 0.1 percentage points lower than the expected value. The U.S. labor force participation rate in August was 62.40%, compared with the previous and expected values of 62.10% and 62.20%, respectively. But the labor force participation rate — the proportion of the working-age population who are either employed or looking for work — is still more than a percentage point below pre-pandemic levels.

The August nonfarm payrolls report suggested the Fed would think the labor market could withstand more aggressive tightening. While U.S. employment will slow as interest rate hikes dampen economic activity, U.S. employment participation may begin to rise as households seek to escape the loss of real spending power. The labor market is returning to a sustainable state, which is acceptable to the Fed. All of this suggests to us that the Fed is going to see some easing in the labor market, achieving its goal in terms of slowing economic activity, which could mean they can raise rates by as little as 50 basis points in September.

The Fed has raised interest rates from near zero to the current range of 2.25% to 2.50% since March. Although falling commodity prices slowed the pace of inflation, the annual consumer price index rose 0.6 percentage points in August from the previous reading, but it was not enough for the Fed to judge that inflation is really starting to fall.

Nonfarm payrolls beat forecasts for the fifth straight month, showing the resilience of the U.S. economy. The dollar's conditioned decline was related to a small drop in wage data, but nothing materialized and the dollar still has room to buck the trend. The energy crisis has hit the euro zone and the U.K. hard, while a downturn in Asia is weighing on commodity currencies, all of which mean that the dollar will see even higher gains once the dust settles. The U.S. dollar will see a sharp rebound from any imminent decline.

Aggressive rate hikes by the Federal Reserve aimed at reining in severely high inflation not seen in decades have also fueled fears of an economic slowdown. Although gold is seen as an inflation hedge and a safe haven, higher interest rates increase the cost of holding gold. The hawkish Fed forecast continues to favor USD bulls, so there are still risks for the precious metals to fall further.

Brandywine Global portfolio manager John McClain commented on the US non-agricultural data: Investors should not overinterpret a certain number, but this time it is a set of data. The data suggest that the Fed should continue to implement rapid and violent restrictive policies. While the downwardly revised unemployment rate rose, the labor force participation rate rose. Strong gains in risk assets will lead to easy financial conditions that the Fed has just expressed dissatisfaction with.

"Typically, once the labor market goes downhill, it picks up speed and keeps going," said Claudia Sahm, a former Fed economist and founder of Sahm Consulting. As an economist, she founded the eponymous Sahm. Mu's Law". The law states that once the three-month average unemployment rate rises by 0.5 percentage points from its recent low, the economy is already in recession.

However, Sahm is now open to the possibility of unexpected outcomes, given the odd behavior of the labor market during the pandemic. Her baseline scenario is that the unemployment rate rises to around 4% and that job losses are less than a million jobs. But to get such results, a lot has to be done. "It depends on supply chains recovering, more people returning to work, consumers being more price-sensitive, which is economic normalization."

The gold daily candlestick chart shows:

The short-term decline has not seen the final step. Although the low level has a short-term recovery, the previous low level is close at hand, and the top is about 1756. The low-level support is about 1679. The MACD indicator is in the short-term area, and the RSI indicator is in the The bearish area remains weak, as shown in the figure:

[Disclaimer] This article only represents the author's own point of view and does not constitute any investment advice. Please read this for reference only and assume all risks and responsibilities.