Gold May Drop On US Jobs Data Even If Payrolls Are Dismal – – Daily Cryptocurrency and FX News

Gold May Drop On US Jobs Data Even If Payrolls Are Dismal – – Daily Cryptocurrency and FX News

The prices of gold mark-timed this week after roaring higher after the Jackson Hole symposium. Traders appear to have read a speech by Fed Chair Powell as ‘dovish’ where he managed to separate the start of tapering QE asset purchases from the subsequent interest rate hikes, stating that the latter remains distant even as the former has to start sometime this year.

Lack of follow-through appears evident. Traders were seemingly cheered by Mr. Powell’s cautious posture, suggesting that they were anticipating a stronger commitment to policy normalization.

Nonetheless, their reluctance to adopt this narrative going forward this week seems to highlight the fact that the central bank top executive still provided the most hawkish assessment of future policies since the coronavirus pandemic came in.

The gold markets were seen to bristle at just the mention of considering a wind-back of QE just several months ago.

They now saw the start of this process within four months as ‘dovish’ speaks loudly about the Fed’s communication strategy that appears to have successfully acclimated the investors to the need of pulling back on the emergency support. That may push the officials to escalate some more, provided that the economy complies.

How US Jobs Data Will Shape Fed Policy Bets

The latter bit of that headline will come into play as August’s US employment reports are released later today. It is now expected to deliver a slowdown in hiring, with a 750k increase in payrolls marking the smallest gain in about four months. The jobless rate is anticipated to drop even as the wage inflation remains at a massive 4% on-year.

When taken together, it hints that weakness in the headline number shows labor shortages instead of weakening demand. That may inspire worries about a wage-push inflationary atmosphere, whereby firms pass on higher labor costs to the consumers by raising the prices of commodities, and workers respond by demanding still-higher wages to cope with the economic environment.

Whenever such a dynamic arises it may turn what the Fed still says is a “transitory” rise in price growth into something long-lasting, pushing the central bank off-course as it attempts to land inflation at the 2% target.

In the case the markets encounter some appreciable risk in the probability of this occurrence after the jobs report, they may eventually say that tapering QE might be made official as soon as September’s FOMC meeting.

Gold prices might suffer against the backdrop as the USD gains alongside the Treasury bond yields, undermining the appeal of the non-interest-bearing, perennially anti-fiat yellow metal.

Gold Price Technical Analysis

The prices of gold are currently hovering below the resistance at 1834.14 after mounting a spirited recovery in August after tagging a 4-month low. Negative RSI divergence warns that upside momentum is weakening, which might set the stage for a reversal downside trend.

A  daily close below the support at $1787.37 might set the stage for gold to drop to the support that has formed at $1755.50. In case this support also breaks, a drop to $1,700 and a revisit of the 2021 lows at $1676.91 is highly likely. On the other hand, a push above the immediate resistance will open the way for the precious metal to retest the next resistance that has formed at $1870.75.

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