Daily Market Recap – GOLD Price falls after US jobs report

Gold prices began a correction after the release of two better-than-expected indicators on the U.S. labor market. These data are fuelling fears that the Fed will move sooner than expected on the path to tightening monetary policy.

The monthly private employment survey from ADP showed an unexpected increase in job creation last month, to 978,000, the highest figure recorded since June 2020. Weekly jobless claims fell to their lowest level since the start of the COVID-19 pandemic, suggesting a recovery in the labor market despite a labor shortage.

While these better-than-expected indicators bode well ahead of Friday's monthly employment report (NFP), they may provide arguments for the Federal Reserve to begin considering a normalization of its ultra-accommodative monetary policy, a rhetoric that is beginning to be heard from some at the institution.

Following the releases, the dollar strengthened and the yield on 10-year Treasuries gained more than two basis points to 1.616%. On the other hand, the yellow metal fell sharply towards $1,865.

After several weeks of gains, the ounce of gold underwent a major correction on Thursday. Indeed, prices had confirmed a bullish recovery signal in early April when they crossed the upper bound of their channel.

For the moment, this is a simple corrective movement, the market is evolving in a bullish channel, so a return to the lower bound for support of around $ 1,850 would not be excluded. The warning signal for sellers will be given only if the price of gold breaks through the $1,850 level coupled with the 200-period moving average. A break below this level would weaken the current trend and the risk of a fall towards $1,790 would be a possible scenario.

Nevertheless, we believe that the $1,850 support is a key pivot point, so buyers should defend this level to restart the upward momentum towards $1,960. While gold is experiencing short-term profit-taking, precious metals (silver) are beginning to come back into focus and their chart pattern is arguing for a new leg up.

(Chart Source: Tradingview 03.06.2021)

Looking ahead to tomorrow, the much-anticipated monthly employment report, the so-called NFP, should be particularly important for gold. The consensus is for 650,000 jobs to be created and the unemployment rate to fall to 5.9%.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.