World gold prices just had a strong breakthrough session, regaining the 4,100 USD/ounce mark after the US released a series of important data on the labor market.
This development shows that investor sentiment is changing rapidly, from concerns that the US Federal Reserve (Fed) will continue to tighten monetary policy to expectations that the Fed may become softer in the near future.
Last night, spot gold prices at times traded around the 4,120-4,130 USD/ounce range, up more than 2% during the day. Spot silver also increased sharply, surpassing the 61 USD/ounce range.
According to published data, the US economy only created 57,000 non-farm jobs in June, much lower than the forecast of about 110,000-11,000 jobs by experts. Not only are the main figures disappointing, the report also adjusted down the jobs of previous months. The total number of jobs in April and May was adjusted down by 74,000 jobs.
This information immediately put pressure on the USD. As the greenback weakens, gold becomes more attractive to investors holding other currencies. At the same time, the yield of 10-year US Treasury bonds fell to around 4.5%, reducing the opportunity cost of holding gold - an unprofitable asset.
A noteworthy point is that the US unemployment rate decreased from 4.3% to 4.2%, contrary to the market's sideways forecast. However, this figure is not enough to dispel concerns that the recruitment momentum is slowing down. The fact that the number of new jobs is much lower than expected shows that the US labor market is no longer as hot as before.
With the gold market, weak employment data is often seen as a supporting factor. The reason is that when the economy shows signs of slowing down, the Fed will be under less pressure to continue raising interest rates. Even if subsequent data continues to worsen, the market may consider the possibility that the Fed must shift to a more loose policy.
Technical analyst Waleed Said at GivTrade said that this data is beneficial for precious metals because it reduces pressure on the Fed to raise interest rates. According to him, this is a sign that the job market is starting to cool down and the Fed may have to reconsider its monetary policy orientation.
However, the upward momentum of gold does not only come from the jobs report. The geopolitical context in the Strait of Hormuz also contributes to strengthening safe haven demand. Ship traffic through this area has stabilized but is still lower than before, while instability related to control and approval of traffic through the strait has not been completely resolved.
In addition, the US market entered a period of thin liquidity before the National Day holiday 4. 7. When liquidity decreases, fluctuations of the USD, bond yields and precious metal prices are often easily amplified. This partly explains why gold prices increased rapidly and strongly after surpassing short-term resistance zones.
In the opposite direction, some experts believe that it is not necessary to hastily conclude that the Fed will change policy after just one report. Fawad Razaqzada - market analyst at FOREX. com - noted that one month of data is not enough for the Fed to change its position, because the biggest focus of the US central bank is still inflation.
Technically, the fact that gold prices rebound to the 4,100 USD/ounce mark is an important signal for buyers. If momentum is maintained, gold prices may continue to move towards the resistance zone of 4,162-4,214 USD/ounce. Conversely, if the USD recovers or bond yields increase again, gold may face profit-taking pressure after a hot session.
In general, the breakthrough of gold prices last night is the result of a combination of many factors: US job data weaker than forecast, USD depreciation, bond yield cooling down, expectations of a less tough Fed and safe-haven demand still present. In the short term, the developments of the upcoming US inflation data will continue to be a decisive factor in the next direction of the precious metal.
