Gold Price Fundamental Daily Forecast – Upside Surprise in Jobs Data Could Spike Bullion Prices Lower

Gold futures are trading higher on Friday as Treasury yields and the U.S. Dollar eased ahead of the release of the U.S. Non-Farm Payrolls report at 12:30 GMT. The report could shed more light on the Federal Reserve’s rate-hike path.

At 10:43 GMT, December Comex gold futures are trading $1652.30, up $21.40 or +1.31%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $151.81, down $0.58 or 0.38%.

Fed Recap

The U.S. Federal Reserve raised interest rates by 75 basis points for the fourth time in a row this week, but also signaled it may be nearing an inflection point in what has become the fastest tightening of monetary policy in 40 years.

Global interest rates are likely to stay elevated for a long time, but slowing the pace of the rate hikes could see the pace of decline in gold prices moderate. Nonetheless, we may not see a bottom in the gold market until the Fed stops raising rates, which may not take place until June 2023.

US Economic Data Mixed Ahead of Friday’s Non-Farm Payrolls Report

On Thursday, U.S. Weekly Unemployment Insurance Claims totaled 217,000 for the week-ended Oct 29, down 1,000 from the previous period.

The September trade deficit widened to $73.3 billion. $1 billion more than expected and up from August’s $65.7 billion.

Unit labor costs increased 3.5% for the July-to-September period, below the 4% Dow Jones estimate. However, productivity rose at just a 0.3% annualized rate, below the 0.4% estimate – a reflection of upward price pressures that have kept inflation running around 40-year highs.

Outplacement firm Challenger, Gray & Christmas reported that announced layoffs for October jumped 13% to the highest monthly rate since February 2021.

The U.S. services industry grew at its slowest pace in nearly 2-1/2 years in October, but businesses continued to face higher prices for inputs, confirming that inflation was shifting to services from goods.

US Labor Market Data on Tap

Gold investors were turning their attention to key U.S. jobs data from October with economists polled by Reuters expecting Non-Farm payrolls to show an increase of 197,000 jobs in October. The Unemployment Rate is expected to rise slightly to 3.6% and Average Hourly Earnings are expected to have risen 0.3%, matching the September increase.

An upside surprise in the headline number or a downside surprise in the unemployment rate would reinforce the Fed’s higher terminal rate posture and keep the U.S. Dollar bid. This would put pressure on gold prices.

But a softer headline print can weigh on the dollar. A jump in the unemployment rate could also have the same effect. This could encourage gold bears to cover their shorts.