Gold – Testing $2,000 after a surprisingly strong jobs report

  • NFP in November 199,000 (184,000 expected, 150,000 in October)
  • Average hourly earnings in November 0.4% (m/m) (0.3% expected, 0.2% in October)
  • Gold testing $2,000 support

There’s been a lot of talk this week about whether investors have become too optimistic about interest rate cuts next year and today’s jobs report may have brought some crashing back down to earth.

Don’t get me wrong, it’s not a terrible report by any stretch of the imagination. But it may well convince the Fed that it must proceed cautiously when it next meets. Which makes the four or five rate cuts starting in March that markets had priced in a little harder to justify as it doesn’t allow much of a turnaround, even accounting for the late pivot that was expected from the Fed.

Despite the setback, markets are still pricing in a rate cut by May and four in total next year so it isn’t that much of a setback. The jobs report just wasn’t ideal and didn’t really fit the narrative that had been building in the markets, some would say too much.

Jobs growth was a little stronger while unemployment unexpectedly fell by 0.2% to 3.7% which came as quite a shock. But it was the wages component that was most disappointing after a few very promising reports. It was never likely to be plain sailing when it comes to wages but today was definitely a small setback.

Ultimately the dot plot next week will tell us where the central bank sees interest rates over the coming years but it won’t tell us when the easing cycle will begin, and for that, the forecasts and commentary will be helpful. We’re now in a position where a disappointing November inflation report could see the Fed maintain its prepared to hike if necessary narrative, putting a March cut in serious doubt.

Gold slips after jobs data

Gold is down more than 1% after the US jobs report and threatening to break back below $2,000 in the same week it started by soaring to record highs.

XAUUSD Daily

Source – OANDA

It really has been quite the week for the yellow metal and with US inflation and the Fed interest rate decision to come next week, the volatility may not be going anywhere.

A move below $2,000 could be viewed as a bearish move, perhaps a sign of a deeper correction after such a strong rally since early October.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam