The U.S. jobs report released on Friday showed that the economy is moving towards recovery. Better than expected was the conclusion underneath. The hope for an early return to the pre-pandemic period was reawakened by the jobs report.
Now the whole financial world is looking forward to the upcoming meeting of the Fed Committee in Jackson Hole. Here also the fate of gold could be decided.
In fact, the outlook is far better than it has been in recent months. The unemployment rate has fallen to 5.4%. The Fed’s target of 4.0% is thus not far away. A withdrawal from the purchase of the $120 billion in government bonds to keep interest rates near zero no longer seems unrealistic. Also, the early cut from the stimulus packages may become increasingly likely.
Meanwhile, real inflation showed its highest increase in three decades in June.
James Bullard of the St. Louis Fed says the Fed should stop buying bonds to prop up the U.S. economy. That’s because inflation and growth are above expectations. “And there’s a tremendous recovery taking place,” Clarida noted that rate cuts could begin next year. And conditions are likely to be ripe for a rate hike in late 2022. Meanwhile, Kashkari said the Covid Delta variable could cause a “kink” in the labor market recovery and bearish Fed timing.
Significant headwinds for gold, in other words. If the positive jobs report was not enough, the dollar regained some of its old strength. As a result, gold experienced a small breakdown towards the $1,700 mark on Friday.
On gold, Eren Sengezer said on FX Live Forum, “The yellow metal’s RSI, the relative strength index, has fallen below 40 for the first time in more than a month. This indicates that the downward pressure is increasing. It shows that there is another gap down before gold is technically oversold and sellers are looking for their profits.”
COMEX gold futures for next month fell $43.40, or 2.5%, to $1,763.10 an ounce this week.
Oil markets summary
Oil markets were also hit by a rebounding dollar and Friday yields. But compared to gold, crude prices have better fundamentals to withstand the macroeconomic sell-off.
West Texas Intermediate ended Friday trading at $68.28 a barrel. That’s down 1.2%. As such, WTI experienced its worst week since October 2020, falling 7.7%.
Brent crude, fell 59 cents, or 0.8%, to $70.70 a barrel. That put Brent down nearly 7% this week, its biggest drop in nine months.
Oil and other commodities thus lost ground largely on strong employment numbers and a strengthening dollar. As the COVID-19 count picks up through the Delta variant, this could have a negative impact on oil demand.
Most recently, crude oil prices have gotten a small boost due to renewed tensions between Israel, Iran, and Lebanon. But the strong dollar on Friday has immediately dampened the small upswing.
The spot Market is Opens
Mon. 9 Aug- 2021