World gold prices were under strong selling pressure in the last trading session of the week, after the latest US jobs data showed that the labor market still maintained a much more solid state than forecast. This development caused the USD and US Treasury bond yields to rise, while expectations of the Fed's early interest rate cut were narrowed.
According to the US Bureau of Labor Statistics, the country's economy created an additional 172,000 jobs in May, significantly higher than experts' forecasts. Previously, the market expected the number of jobs to increase only around 80,000 - 85,000. Not only that, the April jobs data was also adjusted to increase sharply, from the initial estimate of 64,000 to 179,000 jobs.
The unemployment rate in May remained unchanged at 4.3%, consistent with the forecast. Although this figure is not surprising, the fact that the number of new jobs far exceeded expectations shows that the US economy has not cooled down fast enough for the Fed to soon switch to a softer stance.
Immediately after the data was released, gold prices fell sharply. Gold prices last night lost the 4,400 USD/ounce mark. Recorded at 10:30 PM on June 5 (Vietnam time), world gold prices were listed around the threshold of 4,350.4 USD/ounce, down sharply 123 USD/ounce compared to the previous day.
In addition, pressure on gold comes from strong job reports that change monetary policy expectations. When the labor market is still healthy, the Fed has more room to maintain high interest rates for longer, and may even continue to maintain a tough stance if inflation is not controlled as desired.
Talking to Kitco News, Mr. Naeem Aslam - Investment Director at Zaye Capital Markets - said that this job report is "hawkish". According to him, this data supports a stronger USD, pulls bond yields up and weakens expectations of drastic interest rate cuts.
Gold may be under pressure in the early stages as yields and the USD increase, unless geopolitical concerns continue to maintain safe-haven demand" - Mr. Naeem Aslam said.
Besides the number of jobs, wages are also a factor that the market is paying attention to. The report shows that average hourly income increased by 12 cents, equivalent to 0.3% in May. Compared to the same period last year, wages increased by 3.4%. This is an increase that is consistent with forecasts, but still shows that labor costs pressure has not completely disappeared.
Mr. Chris Zaccarelli - Investment Director at Northlight Asset Management - said that with positive labor data, market attention will continue to focus on inflation. According to him, if the US economy still creates more jobs, the unemployment rate remains low while inflation is controlled, the economy may enter a relatively favorable balanced state.
However, this expert also noted that it is difficult for the Fed to cut interest rates when inflation is still high. Conversely, if inflation does not increase again, especially in the context that risks around the Strait of Hormuz are still being controlled, the Fed is also not sure to be under pressure to raise interest rates further.
Geopolitical factors in the Strait of Hormuz are still an important channel of impact on gold, oil, interest rates and risk psychology in the financial market. However, the current impact is assessed to be still under control, not creating a state of chaotic fluctuation. Brent oil prices are still fluctuating below 100 USD/barrel, while WTI oil is trading around 92 USD/barrel.
Technically, the 4,500 USD/ounce zone is becoming an important psychological threshold for gold prices. The fact that prices have repeatedly failed to hold this zone shows that sellers still dominate in the short term. According to technical analysis from Kitco, buyers need to bring prices back above the 4,481 USD/ounce zone to improve prospects, before heading towards the 50-day moving average around 4,630 USD/ounce.
In the opposite direction, if gold prices break through the support zone near the 200-day moving average around 4,428 USD/ounce, downward pressure may expand. Deeper support zones are noteworthy at 4,366 USD/ounce and 4,009 USD/ounce.
