Gold prices are falling, but the US employment report could be much worse news

Gold prices are falling, but the US employment report could be much worse news
Gold prices are falling, but the US employment report could be much worse news
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Gold prices dropped to their lowest level since July the day before. In contrast to the rise in the US dollar, the anti-fiat yellow metal fell as the 2-year US Treasury yield hit a new high for the year. Gold is suffering from the US-led global monetary tightening.

Most of August was spent by investors revising their predictions for a Federal Reserve policy change in 2023.

As a result, the US dollar and bond rates rose. The upcoming employment report of the world’s largest economy is in the spotlight for the next 24 hours. The expected increase in non-farm payrolls for the month of August is approximately 300,000 units. This is substantially lower than the 528,000 earnings recorded in July.

According to economic estimates, the US labor market is expected to remain rigid. With a projected increase in the labor force participation rate to 62.2% from 62.1%, the unemployment rate is expected to remain stable at 3.5%. There were over 11.2 million job opportunities in July, far more than in the years leading up to the outbreak. If the employment report remains strong, the Fed is likely to remain oriented towards the job market, which would be bad news for gold.

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Technical analysis of gold

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Gold has been falling steadily since the beginning of August and is now testing a key support: the July low (1681) and the 2021 low (1676). The 78.6% Fibonacci extension level at 1651 would be reached on a downside, while the 100% level at 1609 would be followed shortly thereafter. Otherwise, the focus would shift to the 20-day simple moving average (SMA) ahead of the important March downtrendline if the market were to turn higher.

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Nearly 84% of retail traders are net-long on gold, according to the IG Client Sentiment Index (IGCS). In general, the IGCS acts as a lagging indicator. Given that the vast majority of market participants are positive, this could indicate that the price of gold is likely to continue its downward trend.

The earning potential is now 5.11% over the previous day and 6.9% over the previous week. Overall, the recent and ongoing mood swings provide a more compelling argument for a bearish-contrarian trading position.

The article is in Italian

Tags: Gold prices falling employment report worse news

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