Just when Gold was raising questions on its recent rally, last week’s labour report proved to be a saviour for the yellow metal. Gold prices traded sharply higher in Friday thus giving a technically bullish weekly high close to gold.
In May, the US non-farm workforce grew up only 38,000, missing the forecast of 160,000 and indicating that the US recovery may be starting to slow. Additionally, the March and April figures were revised 22,000 and 37,000 lower respectively while growth in average hourly earnings last month of 0.2 percent was below the predicted 0.3 percent. The Labour Department report released Friday showed employers added jobs in May at the slowest pace since 2010 as unemployment dropped to 4.7 percent, already reaching the level Fed officials expected to see by the end of 2016. Apart from disappointing headline NFP (nonfarm payrolls) number, there is a also a sharp jump in involuntary part time workers.
A much-weaker-than-expected U.S. jobs report prompted the yellow metal to surge higher, and those initial solid gains have been extended to show gold trading over $30 higher on the day. A sharp drop in the U.S. dollar index also helped push gold prices higher.
A broad slowdown is troubling for the Federal Reserve, which has grown increasingly hawkish in recent weeks following the April meeting minutes, giving their support to a rise in interest rates as early as this month if data warranted such a move. But a negative jobs report has once again left the markets perplexed per se the rate hike.
Considering the pliability of the US economy, has once again raised some questions about the momentum of growth and about the outlook. This in turn takes June off the table for a Fed hike.
Apart from the current news what needs to be watched this week for gold are:
- THE MAIN EVENT: Fed Chair Janet Yellen’s speech today at 10.00 pm.
- Central Bank (Rate Cut) Watch:
- Reserve Bank of Australia (June 7) no change expected
- Reserve Bank of India (June 7) no change expected
- Reserve Bank of New Zealand (June 9) 0.25% rate cut expected
Sentiments for gold are bullish and the major turning pint for this sentiment is the US dollar. Gold could remain in rally mode through the coming week as traders reassess their U.S. dollar and Fed outlook.