©Reuters.
Investing.com – It did not recover Thursday’s losses on US data, but preserved some of its weekly gains and held its position today with no significant losses so far as it is now trading in a tight range up and down in anticipation of data on employment that will be released shortly.
The importance of the employment report is that it serves as a determining factor for the foreseeable future, expressing the extent of the strength or weakness of the labor market and the extent to which it is affected by policy easing and tightening monetary policy, as the Federal Reserve wants a tight labor market to control inflation and achieve a soft recession.
Read also..
gold now
It rose a small percentage of 0.09% to 1834.38 an ounce levels. Prices are up about 0.8% on the week.
US gold futures also fell slightly, 0.08%, to $1,838.80 levels.
Yesterday’s data
Gold prices fell on Thursday as expectations rose on the continued rise in US interest rates. As the precious metal was negatively impacted by the increase in the two-year yield to 4.45%, after data confirmed the continued strength of the labor market, which supports the continuation of interest rate hikes by the Federal Reserve.
Yesterday’s data showed that the US private sector added 235,000 jobs in December, beating expectations by 153,000.
Separate data revealed that initial jobless claims in the US fell by 10,000 to 204,000 in the week ending Dec. 31.
At settlement time, February delivery was down 1%, or $18.40, to $1840.60 an ounce.
While the one that monitors the performance of the US currency rose against a basket of six major currencies by 0.7% to 104,968 points.
Important data today… turning points
Market attention turns to data due to be released on Friday by the US Department of Labor.
Few US central bank officials on Thursday reaffirmed their commitment to the fight to bring inflation down to the 2% target, but St. Louis Federal Reserve Chairman James Bullard said 2023 could finally see some relief in the fight against inflation.
High interest rates reduce the attractiveness of the yellow metal, which is a hedge against inflation but does not produce a return.
“Labor market weakness is just around the corner and until that happens, gold could be stuck above the $1,800 level,” OANDA senior analyst Edward Moya said in a note.
Employment data. Market expectations
Market expectations indicate that the accelerating pace of interest rate hikes could have a negative impact on the US economy. According to forecasts, the US economy is likely to create only about 200,000 jobs. Expectations also point to wage growth of 0.4% over the same period, as well as stable unemployment at the level of 3.7% at the end of last December.
If US labor market data is positive or better than expected as the economy adds many jobs and unemployment falls below the 3.7% level, this could send the dollar index higher towards the 106 points level and could head towards the 107 or 108 points level, as this scenario will give the US Federal Reserve more flexibility regarding continued monetary policy tightening during the upcoming 2023 bank meetings. This will cast a negative shadow on the precious metal prices.
While the second scenario is negative US labor market data and the economy is adding fewer jobs than expected and unemployment is rising, so gold prices are likely to rise and daily earnings can break through the 1% or 2% levels which could push gold higher over the next 1900 days due to the impact of the labor market on Federal Reserve decisions. Also, in this case, the dollar will fall below the 105 point level again and could drop towards the 103 point level or lower, because this scenario will make the Fed more willing to slow the pace of interest rate hikes during the next meeting in February, and maybe keep interest rates unchanged.
