Gold Fundamental Forecast – Bullish
- Gold traders bought the metal on Friday following the August U.S. jobs report.
- Bullion prices are expected to prolong Friday’s moves as Treasury yields decline.
- Mr Powell, President of the US Federal Reserve and Vice President Bernard Speech poses a risk
Gold prices have fallen regarding 1% last week. Even increased at the end of the week on Friday. After the US non-farm payrolls (NFP) report, the US economy. Added 315,000 jobs in August. Higher than Bloomberg’s consensus forecast of +298k, Federal Reserve Chairman Jerome Powell said on Friday. has driven away the narrative of the market pivot point. Powell stated that the US Federal Reserve will continue to raise interest rates
That sent gold’s sensitive breakeven rate – the difference between the nominal Treasury yield and the inflation index – lower all week. The one-year break-even rate fell below 2% for the first time since 2020, but started climbing following the US employment report crossed the line. The increase helped raise the price of gold bullion.
Rate traders buy Treasuries following the employment report revealed some weak wage data compared to expectations. Bets on the Fed’s rate hikes have cooled, although traders are still leaning towards a 75 basis point hike at the September FOMC meeting. Average hourly earnings are up 5.2% year over year. It falls short of forecasts of 5.3% annually. That’s a sign of weakness in the still tight labor market, an encouraging sign for Fed policymakers.
Friday’s NFP report is the latest ahead of the Sept. 21 FOMC meeting. The upcoming trading week offers a glimpse of the economy that may move in gold, with the ISM services sector PMI due to Tuesday’s crossover. Analysts saw the gauge drop to 54.9 from 56.7 July trade balance data. unemployment benefits And the wholesale inventories will be complete next week.
Chair Powell is scheduled to speak Sept. 8 at the Cato Institute annual meeting. Vice Chairman Lael Brainard’s comments on Sept. 7 are also likely to grab market attention. Gold’s direction may depend on Fed’s words. If Mr Powell or Mrs. Brenard gave traders a reason to continue with the withdrawal rate of their bets, it is likely that XAU will move higher. meanwhile A sharp rebound in FOMC betting is unlikely following event data. That said, gold prices may move higher this week.
— Written by Thomas Westwater, analyst at DailyFX.com.
To contact Thomas, use the comments section below or @FxWestwater on twitter
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