All traders were very focused on the US NFP data, and the question that they have been asking throughout this week is whether good news is going to be good news or if bad news is going to be good news. The data undoubtedly provided positive news for the Fed, but it did not significantly impact gold traders, as it confirmed the robust state of the US labor market. The data came in very hot and blew past all expectations, and the knee-jerk reaction for the gold price has been very much like that text book, which was on the downside. However, investors should always pay attention to the details.
All traders were very focused on the US NFP data, and the question that they have been asking throughout this week is whether good news is going to be good news or if bad news is going to be good news. The data undoubtedly provided positive news for the Fed, but it did not significantly impact gold traders, as it confirmed the robust state of the US labor market. The data came in very hot and blew past all expectations, and the knee-jerk reaction for the gold price has been very much like that text book, which was on the downside. However, investors should always pay attention to the details.
Today’s US NFP data came in at 272K, while the forecast was for 185K, much stronger than the previous reading of 165K. This data print has undoubtedly shut down discussions about a potential interest rate cut in July, and it has sparked discussions about limiting the policy to bring inflation closer to the Fed's target. This particular argument is very strong, and we believe that traders should pay attention to it, as there has been some discussion among Fed members regarding the need for an additional interest rate hike to control inflation. Given the strength of the number and the recent weakening of the doves' position, the best argument they can make is that we should wait a little longer to reap the full benefits of their hard work before making another policy error.
However, gold traders are also aware that the headline number, the US NFP data, is not the only factor to consider. A series of adjustments and data points have demonstrated significant weaknesses in the data, prompting the Fed President to reconsider making hasty decisions. In addition, the unemployment rate has actually ticked higher to 4.0% from its previous reading of 3.9%. Additionally, the US CPI numbers are scheduled for release next week, and a deviation from the original mean forecasted point could significantly alter the landscape.
Overall, today's numbers have been overwhelming for traders who have pushed the price down, but the move to the downside has been very limited. This tells us that one needs to filter out the noise that many TV gurus would be talking about and pay attention to the truth, which is found in the price.
In terms of the price action, the price continues to trade within the range that is mentioned on the chart below, while the main important support zone is at 2,300. While it's possible for prices to breach this price level, it's crucial that they stay below it, as this would indicate the establishment of a distinct downward trend.
