The gold market will be waiting for information that will help add some clarity to the Federal Reserve’s open-ended monetary policy stance. Thus, disappointing economic data will support higher prices.
Gold prices will react bullishly to softer data!
Analysts do not expect a major break in gold in the near term. Some say the trend is upwards as the Federal Reserve’s monetary policy stance is expected to weaken the economy. cryptocoin.com As you follow, as we enter the weekend, gold prices rose above $1,950. Kevin Grady, head of Phoenix Futures and Options, expects gold prices to test the upper end of its current range in response to softer data. Grady says a definite softening trend could boost gold. However, he adds that even the slightest sign of weakness will support the price. In this context, the analyst makes the following assessment:
The market is desperate for any clarity. Currently, the Federal Reserve will maintain its hawkish trend. Because they want to see inflation fall further. So any soft data that will change this trend will be good for gold.
Data of the week: US nonfarm payroll report
There will be various economic reports that may be of interest to investors. The real event, however, will be on Friday when the US Department of Labor’s July nonfarm payrolls report is released. Lukman Otunuga, head of market analysis at FXTM, says gold will be particularly sensitive to employment numbers due to the Federal Reserve’s data-driven stance.
The path of least resistance for gold is to the north
Otunuga says the Fed wants to see some cooling in the labor market as a condition for controlling inflation. The latest report, the Department of Labor, showed that the economy created 209,000 jobs in June. This is the first time employment data has missed expectations since May 2022. From this point of view, Otunuga points out the following levels:
Every U.S. data point going forward will act as a key piece that will determine whether the Fed will raise rates one last time in 2023. Markets priced in the possibility of a rate hike of only 18% in September. Also, given that this rose to just 37% in November, the gold bulls remain in a comfortable position. The path of least resistance for gold points north with a disappointing jobs report next week. This potentially opens a path towards $1,985. A solid break above this point could open the doors towards the psychological $2,000 level.
What effect will the data have on the yellow metal?
Some analysts say weak economic data will also increase fears of a potential recession. In addition, they state that there will be an inevitable change in monetary policy. They also note that these developments will weaken the US dollar. He also states that gold will support its safe-haven appeal. Stuart O’Reilly, Royal Mint Market Foresight Analyst, told Kitco News that:
Central banks now have the responsibility to strike the right balance in interest rates. Investors will look for signs to assess whether the banks’ actions have been successful. Persistent high inflation or signs that a major economy may be in recession may prompt some investors to increase their allocations of gold as a traditional ‘safe haven’. Signs of economic recovery and falling inflation may have the opposite effect. While central banks get through this challenging period, global economies learn whether the latest interest rate hikes have gone too fast and too far, it is a matter of curiosity how gold will perform in the coming months.
When this happens we will see very high gold prices!
Bob Haberkorn, senior commodity broker at RJO Futures, does not expect to see a significant deterioration in economic data next week. However, he adds that reports should begin to highlight a slowing pattern. In this context, Haberkorn makes the following comment:
We’re starting to see inflation turning in the right direction. Because interest rates are starting to bite the economy. When you look under it, you see that it is in a wonderful place. It is holding above $1,950 even after the Fed raises interest rates above 5%. As soon as the Federal Reserve says it has finished tightening, we will see gold prices much higher.
Next week’s data
- Tuesday:US ISM manufacturing PMI, JOLTS employment report.
- Wednesday:US ADP nonfarm employment.
- Thursday:Bank of England monetary policy decision, unemployment claims, ISM services PMI.
- Friday:US nonfarm employment.
