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Investing.com – With so much uncertainty gripping financial markets, most analysts expect it is only a matter of time before gold prices reach new highs above $2,000 an ounce.
However, it may be difficult for gold to achieve its new target next week. The cautious outlook for gold comes as the precious metal saw big moves above $2,000 an ounce.
It is worth noting that the US market is closed today due to Holy Friday.
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Gold at the settlement of the week’s trading
Gold prices fell at the settlement of transactions, yesterday, Thursday, but achieved weekly gains, with continued fears of a recession in the largest economy in the world.
Yesterday, US Labor Department data showed that jobless claims fell by 18,000 to 228,000 during the week ending April 1st, against expectations of a drop to 200,000.
Upon settlement, June delivery fell by 0.5%, or $9.2, to $2,026.4 an ounce, but achieved a weekly gain of 2%.
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Gold and employment data
It settled near its highest levels recorded at the beginning of this week, amid a succession of signs of a slowdown in the economy, a decline in demand, and a decrease in inflation, according to the latest recorded data, which opens the way for the Federal Open Market Committee to expedite the end of the series of raising interest rates, which may cause pressure on the American in favor of assets. other financial like gold.
The latest US data showed a slowdown in the growth of non-farm private sector (ADP) jobs during March, after it recorded increases less than analysts’ expectations, according to the national employment report issued yesterday, Wednesday. The number of jobs recorded an increase of 145 thousand during the past month, compared to 242. Alpha in February.
In addition to negative labor market data, as the US economy created approximately 9.931 million jobs, while experts expected 10.4 million jobs to be created in March.
Currently, the markets are awaiting important data scheduled for release on Friday, about the duration of the change in non-farm employment and unemployment in the United States, which will be decisive regarding the Fed’s policy during the upcoming MPC meetings. As analysts expect it to come negative as well, similar to the initial employment data, labor market data, and unemployment, which will be very positive for gold.
The dollar is trying to go up
Last week, gold benefited greatly from the sharp decline in bond yields, which in turn affected the US dollar.
According to some analysts, if the US dollar finds some momentum, it could prompt investors to take some profits from their bullish bets on gold.
“It appears once again that the US dollar is attempting a short-term bullish run on its daily chart while gold in June looks a bit heavy. According to Darren Newsom, Senior Market Analyst at Barchart.com.
The future of the US dollar and gold can be determined by a handful of reports next week, starting with the non-farm payrolls report for March which will be released on Friday.
Analysts note that investors and traders will have to wait until the markets open on Sunday before they can react to the data. According to consensus forecasts, economists expect the economy to create 239 jobs last month. Analysts note that anything better than expected would be bullish for the US dollar and gold negative.
Gold may breach the previous maximum
While the US job market has been surprisingly resilient since early 2022, economists note that there are signs that it is beginning to turn around, highlighting weakness and stoking recession fears.
“If today’s NFPs follow the steps of recent data releases, which show signs of weakness in the US labor market, I would expect further dollar weakness and corresponding upside for the precious metal,” said Ricardo Evangelista, Senior Analyst, ActivTrades.
“I can expect gold to break the previous maximum of $2,069 that was touched during the summer of 2020.”
Due to current market conditions and sentiment, employment data could surprise markets and miss expectations, said Craig Erlam, senior market analyst at OANDA.
He added, “Any disappointing data or even numbers that are in line with expectations and we will see gold reach its highest levels.”
The rules of the game will not change
Aside from the jobs report, analysts note that next week’s inflation data may also provide some support for the US dollar. Economists said that a strong labor market and persistently high inflation may force the Federal Reserve to continue raising interest rates.
There is growing speculation that the Fed’s tightening cycle is over. CME FedWatch shows that markets see roughly a 50/50 chance that the central bank will leave interest rates unchanged between 4.75% and 5.00%.
While another 25 basis point increase in May would create a headwind for gold, many analysts do not see it as a game-changer for the precious metal. Many analysts note that in this environment, investors will have to wait a little longer before seeing record highs again.
“There are strong reasons why we are trading at these levels,” said Sean Lusk, Co-Director of Hedging at Walsh Trading. “We are seeing a huge rally in precious metals due to the great uncertainty in the world.”
Lusk added that if gold tests support around $2,000, investors may want to buy gold futures.
Looking beyond US interest rates, Lusk said the ongoing banking crisis will continue to underpin gold as a safe-haven asset.
