The August non-farm payrolls released by the United States on Friday were basically in line with expectations, but the unemployment rate unexpectedly rose, the dollar made a short-term downward reaction, and the gold price rebounded to an intraday high of 1715 accordingly. However, at a time when the Fed prioritizes controlling inflation, the rise in unemployment will not interrupt the dollar’s rise, which means that the decline in gold prices is also difficult to change. Technically, the rebound of gold prices may be limited, and the follow-up focus will be on the first-line support at 1680 below.
Gold’s rebound after U.S. non-farm payrolls may be temporary
Data released by the U.S. Labor Department on Friday showed that the U.S. added 315,000 nonfarm payrolls in August, slightly higher than the 300,000 expected; however, the unemployment rate unexpectedly rose to 3.7%, as expected to remain at the previous level of 3.5% . After the data was released, the dollar index fluctuated and fell, and the price of gold rose to an intraday high of $1,715 per ounce in the short term.
In the short term, the rising unemployment rate combined with the false breakthrough of the US dollar index through the resistance of the 109-109.30 area, the US dollar may have room for downward adjustment, which will be beneficial to the rebound of gold prices. However, this data will not have a subversive impact on the strength of the dollar, because a small increase in unemployment will not interrupt the Fed to continue to raise interest rates sharply, so even if the price of gold rises, it will be temporary and staged.
Recent speeches by Fed officials, including Powell, have shown that continuing to raise interest rates to control inflation is the top priority, and that the slowdown in the economy and the job market is the price that must be paid for suppressing inflation. And they believe that the process of fighting inflation will take a long time, and interest rates will remain high for some time in the future.
And the direction of future changes in real interest rates will be detrimental to the price of gold. Currently, the real yield measured by the yield of 10-year U.S. inflation-protected bonds has risen to a high this year, the latest at 0.81%. With the interest rate hike in the future, the nominal interest rate in the United States will continue to rise, and although inflation is at a high level, it has basically peaked, so the real interest rate will continue to rise in the future.
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Gold price trend technical analysis
The daily chart shows that the price of gold briefly fell below 1700 yesterday and then rebounded. If it continues to rise, it will encounter resistance at levels such as 1720 and 1730, and it is expected that it will be difficult to effectively break the strong resistance of 1730. If it resumes the downward trend, the initial support will continue to focus on the 1700 line, and the more critical support level after falling below is 1680. This is the reversal point of many market conditions since March last year, so the gain or loss of this support may determine the longer-term trend direction. (Follow the author on Twitter @Legen_DailyFX )
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