NFP miss boosts the case for further upside in gold

Following the large beat by the ADP employment report last Thursday night, Fridays Non-Farm Payrolls data was rapidly elevated to the status of the most important economic number since the pandemic due to its ability to provide a more concrete timetable for tapering.

Gold 4

However, hopes were dashed as the report showed the US economy added 559k jobs in May, below market expectations of 674k.

It also showed a decline in participation to 61.6%, a rise in earnings, and a long work week that did little to clear up the questions of labour supply factors raised after a weak jobs report in April.

This has removed some of the pressure from the Federal Reserve to move earlier to taper, although it doesn’t change the view that the Fed will soon begin the conversation around tapering, possibly as early as its upcoming meeting in mid-June.

Asset markets have opted to take the half glass full view that rates will stay lower for longer, perhaps also reassured that tapering isn’t tightening. After the Fed began to taper in December 2013 it wasn’t until two years later that the Fed raised rates in December 2015.

Buoyed by this, US yields eased lower towards range lows, taking the US dollar index, the DXY with it, and propelling gold over 1% higher, towards $1890.

Learn more about trading commodities here

Technically, after consolidating its breakout of the top of the 11-month trend channel over the past three weeks, the expectation in the medium term is for gold to continue its rally towards the next upside target at $1960 and beyond that the $2075 high from August 2020.

For short-term traders, the preference is to lean against the trendline support currently at $1855 drawn from the 30th of March $1677 low , to enter longs in expectation of a retest and break of last week’s $1916 high, before the $1960 level mentioned above.

Aware that a daily close below $1855/40 would be a setback to the positive bias.

NFP miss boosts the case for further upside in gold

Source Tradingview. The figures stated areas of the 7th of June 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Build your confidence risk free

More from Commodities

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.