At the beginning of Asian trading on Monday, spot gold fluctuated in a narrow range, trading around 1827.23, temporarily holding off most of last week's gains, as U.S. non-farm payrolls fell sharply less than expected. the market generally abandoned expectations that the Federal Reserve announced a reduction in bond purchases in September, and the dollar index continued to fall to a nearly one-month low, helping gold prices rise to around 1830. Considering that the epidemic has also pushed up risk aversion, the technical bullish signal has increased, and the market is more bullish in the short term.
The non-farm payrolls data are disappointing, and the Federal Reserve announced in September that the reduction was almost out of the question.
The disappointing August non-farm payrolls report will almost certainly prompt Fed officials to postpone the announcement of a reduction in bond purchases at its September 21-22 meeting.
The United States added 235000 jobs last month, far less than economists had expected, and the number of jobs added was the lowest in seven months. Economists believe that this indicates that the Fed needs to see more job growth data before it will start to reduce the size.
Officials would like to see "further significant growth" in employment and inflation, and a slowdown in hiring activity means the downsizing is more likely to come in November or December.
Julia Coronado, former Fed economist, MacroPolicy Perspectives president, said, "the non-farm payrolls report eliminates the possibility of code reduction in September, and it is basically expected later this year, and data in the coming months will be important to determine when and how fast the code reduction will be announced."
Roberto Perli, a partner at Cornerstone Macro LLC and a former Fed economist, said: "the sharp decline in hotel job creation and even fewer retail jobs are evidence of the impact of the Delta virus on the job market and may indicate the need for caution, and some officials who want to reduce the size early or quickly may lower the tone slightly."
Speaking at the Jackson Hole seminar on August 27, Federal Reserve Chairman Colin Powell said he believes "significant progress" has been made in the labor market and is expected to meet the conditions required for size reduction later this year. However, the tone of his speech suggested that even before the August jobs report was released, he was in no hurry to take action.
Fed officials are likely to find the details of the report disappointing, including the size of the workforce. Although the unemployment rate has fallen slightly to 5.2 per cent, officials stress that this is only one factor in judging the tension in the job market.
The labor force participation rate is still 61.7%. The labor force participation rate of women between the ages of 25 and 54 fell slightly.
Economists' attention may turn to the meeting of the Federal Open Market Committee on November 2-3. "We still expect a reduction announcement in November, but only if the data bounce back and the weakness caused by the Delta strain turns out to be temporary," Bank of America economists wrote in a report.
Ed Moya, senior market analyst at foreign exchange brokerage OANDA, said: "the knee-jerk reaction to gold prices was positive because the headline data was much lower than expected, almost ruling out the possibility of scaling back quantitative easing in September." He thinks the price of gold is expected to rise to $1850.
"the market focus will shift to the (FOMC) meeting of the Federal Open Market Committee in September," said Suki Cooper, a precious metals analyst at Standard Chartered Bank. Given our expectations that the dollar will weaken and real yields will remain deeply negative, we continue to believe that gold has further upside risks.
In addition, the US services index fell from record highs, providing some confidence for gold bulls.
The Institute for supply Management's (ISM) services index fell to 61.7 from 64.1 in July. The data show that demand for services such as catering, leisure and travel is cooling due to concerns about the highly contagious Delta mutation virus. The ISM business activity index fell to a six-month low of 60.1.
The service industry, like manufacturing, faces many of the same supply and labour constraints. Inventories contracted further in August to their lowest level in a year, while employment indicators for services slowed slightly.
The data also show that the recent accumulation of inflationary pressures is moderating. The ISM price payments index fell to its lowest level since March, hitting a nearly 16-year high in July. At the same time, supplier delivery time and backlog index fell.
However, the figure above 50 indicates that the service sector is still expanding and the support for gold prices is relatively limited.
Delta variant epidemic is heating up, and the number of people unable to work in the United States has soared in recent weeks
The novel coronavirus epidemic still lingers, especially the rapid spread of the Delta virus, which has increased market concerns and provided safe haven support for gold prices.
The number of people unable to work or telecommute at some point in the past four weeks in August rose for the first time since December, in a worrying sign of a US employment recovery, US data showed on Friday.
During the surge in cases of Delta variants across the United States, the proportion of people who said they were not looking for a job because of health concerns about novel coronavirus remained largely unchanged.
The latest figures from the Labor Department are part of a continuing additional survey of households by the U. S. government, which has been released with monthly employment reports since the outbreak began. Overall, job growth in the United States slowed more than expected in August, according to the main report.
The daily number of new novel coronavirus cases in the United States has climbed to a seven-month high, with an average of more than 160000 infections reported nationwide in recent days, and some real-time data indicators show that economic activity has slowed as the number of cases has surged.
"in the final analysis, this wave of Delta variants is a wake-up call that the epidemic is still dominant and controls our economic future," said Daniel Zhao, a senior analyst at Glassdoor.
The rising number of new cases in recent weeks has raised fears that the economic recovery could stall. The jobs report may put the Fed on hold.
"this increases concerns or concerns about the October data because people want to see if there is a trend," said JB Mackenzie, managing director of TD ameritrade futures and foreign exchange. [the Fed] is trying to signal that if the economy continues to heat up, they need to act, and they will, and transparency is important to the market. this is one of the main reasons why you continue to see the market not making a huge downside reaction, because the market feels like it has a clear direction. "
Mackenzie said 92 was an important support level after the dollar rebounded from that level in early August.
At one point on Friday, the dollar index fell to 91.95, its lowest level since Aug. 5, which also provided momentum for gold, which is now trading around 92.15.
David Madden, a market analyst at Equiti Capital, said he was looking at the dollar. If the dollar index falls below 91.75, the price of gold will rise sharply.
But he added that he wanted gold to break through $1835, which remains an important short-term resistance level. He said that gold prices have tested this resistance level three times this year, but have failed to break through.
"I am bullish on gold, but I am still a little cautious," he said. I don't think the reduction in bond purchases will take place in September, nor will it be possible in December, so it is more likely to be implemented in March next year, which may limit the upside of gold prices.
Us stock market hit a record high, gold ETF position is low
It should be reminded that due to the cooling of expectations of the Fed's rapid curtailment of bond purchases, the US stock market has also continued to rise to record highs, which has slightly reduced the attractiveness of gold. The position of the world's largest gold ETF--SPDR is still at its lowest level since April 13, 2020, suggesting that the medium-and long-term upside of gold may be limited.
Ole Hansen, an analyst at Saxo Bank, said: "Gold has received a welcome boost from a much weaker-than-expected [employment] report. But gold failed to break through the resistance level of $1835 an ounce, which could be a sign that some are sceptical about whether this means a peak in growth and a delay in scaling back asset purchases. "
The market is bullish on the future.
On Friday, 15 Wall Street analysts took part in the Kitco gold survey, and 10 of the respondents (67 per cent) expected gold prices to rise. Meanwhile, two analysts (13%) think gold prices will fall this week. Three analysts (20%) took a neutral view on gold prices in the near future.
At the same time, in an online poll, a total of 637 ordinary investors voted. Of these respondents, 416 (65%) expect gold prices to rise this week. Another 118 (19%) expected gold prices to fall, while 103 (16%) held flat expectations.
Adam Button, chief foreign exchange strategist at Forexlive.com, said, "the Fed will not imply a reduction in bond purchases in September. They will only get another jobs report before the November FOMC meeting." Coupled with other signs of weak US economic growth, the likelihood of scaling back bond purchases continues to decline as disappointing growth in the third quarter spreads to the fourth quarter. Gold prices will soon break through the resistance level of $1834 and continue to rise. "
'Gold bulls have a clear technical advantage, and he expects gold prices to rise in the near future, 'said Jim Wyckoff, a senior technical analyst at Kitco.com.
This week, the RBA, the Bank of Canada and the European Central Bank will announce new interest rate decisions. The Federal Reserve will release the beige book, and after the non-farm announcement, a number of officials will make public speeches as usual. The data focus on: China's trade account, foreign reserves, social integration and inflation, Canadian employment and so on.
One caveat: trading in CME's precious metals, US crude oil and foreign exchange contracts closed earlier than 01:00 Beijing time on Monday, which coincides with Labor Day, and trading on Monday may be subject to some restrictions.
Overall, fundamentals, technical aspects and market sentiment tend to be bullish on gold, and gold prices are more likely to break resistance near 1834 this week, if they can further break the resistance around June 4 low of 1856, it is expected to provide an opportunity to rise to the 1900 mark.
0910 Beijing time, spot gold is now trading at US $1827.92 / oz.
