Spot Gold Tumbles Beneath $1,700 Ahead of U.S. Jobs Data

By Barani Krishnan

AiVIF.com -- The bears in gold have been pushing and pushing and they’ve finally got what they wanted: The spot price of bullion tumbled beneath $1,700 for the first time in five weeks on Thursday, just ahead of the U.S. jobs report.

Traders across markets have agonized for weeks on what the August non-farm payrolls could be.

Three separate indicators on U.S. employment — Tuesday’s JOLTS, or the Job Openings and Labor Turnover Survey, Wednesday’s ADP private payrolls report for August and Thursday’s weekly jobless statistics — have told different stories.

“If the nonfarm payroll report impresses, gold could see momentum selling target the $1,650 region,” said Ed Moya, analyst at online trading platform OANDA.

Sunil Kumar Dixit, chief technical strategist at SKCharting.com, concurred.

“Traders seem to be waiting for tomorrow's NFP numbers before they decide whether to break gold further down to retest the July swing low of 1681,” said Dixit. “If NFP numbers come higher than consensus, $1,681 should give way and metal should test the 200-week Simple Moving Average of $1,672 rather quickly.”

The spot price of bullion, more closely followed than futures by some traders, was at $1,695.90 by 15:00 ET (19:00 GMT), down $15.52, or 0.9% on the day. The session low was $1,688.90.

The benchmark gold futures contract on New York’s Comex, December, settled down $16.90, %, at $1,709.30 per ounce.

Gold has fallen without stop for six months now, with bullion losing 12%, or an average of 2% a month, in that span.

“Gold prices are in freefall…after another round of strong economic data suggests the Fed could deliver more rate increases,” said OANDA’s Moya. “Gold is becoming a punching bag as surging Treasury yields have rejuvenated the king dollar trade. It has just been bad news everywhere for gold. No reprieve in sight for gold until the move higher with global bond yields is over. “

U.S. Treasury yields rose for a second day in a row, while the Dollar Index hit new 20-year highs, reaching 112, a peak since June 2002.

The Fed is keeping a close watch on all labor data to gauge how much tolerance the job market will have toward higher interest rates.

U.S. inflation has been running at around four-decade highs since late last year, although the closely-watched Consumer Price Index slowed to an annualized rate of 8.5% in July from a peak of 9.1% in June.

The Fed’s target for inflation is a mere 2% a year and it has vowed to raise interest rates as much as necessary to achieve that. Rate hikes are anathema to gold.

U.S. jobs data has been inconsistent over the past week, confounding economists on what the future holds for the labor market.

The Labor Department reported on Thursday that unemployment claims hit two-month lows last week, forging a clearer path for the Fed to continue with rate hikes to rein in inflation still near four-decade highs.

The weekly jobless statistics came ahead of Friday’s more-important nonfarm payrolls report for August. Economists think some 300,000 payrolls were probably added last month — versus 528,000 last in July — holding the unemployment rate steady at 3.5% for a second straight month. A jobless rate of 4% or below is seen by the Fed as full employment.

Unemployment among Americans reached a record high rate of 14.8% in April 2020, with the loss of some 20 million jobs after the COVID-19 breakout. Since then, hundreds of thousands of jobs have been added every month, with the trend not letting up in July despite a negative 0.6% growth in second quarter gross domestic product this year, after a minus 1.6% in the first quarter that together accounted for a recession.