Gold Poised for Weekly Gains Amid Awaiting U.S. Jobs Data
Gold prices rose during trading on Friday, heading towards weekly gains, driven by expectations of an interest rate cut by the Federal Reserve in September and escalating tensions in the Middle East, while market participants await U.S. non-farm payroll data.
Investors will be watching the U.S. jobs report scheduled for release at 3:30 PM Riyadh time for further signals on the monetary policy path.
Federal Reserve Chairman Jerome Powell said on Wednesday that interest rates could be cut as early as September if the U.S. economy stays on its expected course.
Bullion is considered a hedge against geopolitical and economic risks, and lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Analysts said the concerns surrounding the U.S. elections and the conflict in the Middle East would also help move gold sustainably higher.
Gold and the Dollar Now
Spot gold rose 0.7% to $2,463 per ounce, climbing more than 2% for the week.
U.S. gold futures increased by 1% to $2,507.
On the other hand, the dollar index is now down 0.14% to 104.059 points
Other Metals
Spot silver rose 0.2% to $28.60 per ounce, and platinum increased 0.4% to $962.09. Both metals are set for weekly gains.
Meanwhile, palladium fell 0.7% to $899.15.
Wall Street Sell-Off Intensifies Amid Economic Worries and Market Confusion
U.S. stock indexes fell sharply during Thursday’s trading session, as new data raised concerns about the state of the U.S. economy.
The Dow Jones Industrial Average, comprised of 30 stocks, fell by 520 points, or 1.3%. The S&P 500 index dropped 0.9%, while the Nasdaq Composite Index declined by 1.3%.
Initial jobless claims rose to 249,000 for the week ending July 27, higher than Dow Jones’ expectations of 235,000. The ISM manufacturing index came in at 46.8, adding to a broader picture of economic slowdown.
These data came after the Federal Reserve kept interest rates unchanged, and Chairman Jerome Powell indicated that the September rate cut is on the table. Yields fell on Thursday as investors absorbed Powell’s comments, with the benchmark 10-year Treasury yield hitting its lowest level since February 2.
U.S. Employment Data Expectations: Will the Fed’s Fears Materialize?
The July jobs report is expected to be the latest economic indicator signaling a slowdown in the U.S. labor market as the Federal Reserve approaches an interest rate cut.
The monthly report from the Bureau of Labor Statistics, scheduled for release at 3:30 PM Riyadh time on Friday, is expected to show non-farm payrolls increased by 176,000 jobs in July while the unemployment rate remained steady at 4.1%, according to expert estimates available on Investing Saudi Arabia.
In June, the U.S. economy added 206,000 jobs, while the unemployment rate unexpectedly rose to 4.1%.
Labor Market and Inflation Concerns
There will be a particular focus on the impact of Hurricane Barry on the employment data due later today. The economics team at Goldman Sachs estimates that the hurricane will reduce the total non-farm payroll additions in July by about 15,000.
Economists and Federal Reserve Chairman Jerome Powell have said they are no longer concerned that a strong labor market is driving price increases.
Signs of Cracks in the Economy
The main question in Friday’s report—and throughout the rest of 2024—is whether the slowing monthly job growth reflects early signs of a broader economic slowdown.
American economist Michael Gapen concluded in a research note that the report is likely to show that the labor market is “weakening but at a gradual pace.”
Powell expressed similar sentiments about the labor market during his press conference on Wednesday. He noted that the Federal Reserve is now more attentive not only to the risk of inflation not falling but also to the risk of unemployment remaining elevated. Powell said the Federal Reserve still believes the labor market is in a process of “gradual balance.”
However, the market appears more concerned about cracks appearing in the economy. On Thursday, recent economic data highlighted signs of weakness in the economy.
Weekly jobless claims rose again more than expected last week in the latest sign of a slowing labor market. New data from the Department of Labor showed that 249,000 initial jobless claims were filed in the week ending July 27, up from 235,000 the previous week and the highest level since August 2023.
This came after the Job Openings and Labor Turnover Survey (JOLTS) for June showed a slight decrease in job openings, while hires fell, and quits hit their lowest level since November 2020.
These data contributed to a market sell-off on Thursday, with the 10-year Treasury yield falling to its lowest level since February.
Another concern for investors is that if the July jobs report on Friday reveals that the unemployment rate rose to 4.2% during the month, the “Sahm Rule” could be triggered, where the national unemployment rate’s three-month average rises by 0.5% or more from its lowest point in the previous 12 months. This rule has accurately predicted recessions 100% of the time since the early 1970s, which the Fed fears as it seeks a soft landing—reducing inflation without causing an economic recession.
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.
