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James Hyerczyk
Comex Gold

Gold futures whip-sawed on Thursday before closing at its high for the session. The wicked price action was fueled by two different interpretations of the Non-Farm Payrolls and Initial Claims reports.

On Thursday, August Comex gold settled at $1790.00, up $10.10 or 0.57%.

U.S. Non-Farm Payrolls Report

The Labor Department on Thursday reported U.S. non-farm jobs increased by 4.8 million in June, far better than the 2.9 million jump economists polled by Dow Jones had been expecting.

The national unemployment rate dropped to 11.1% from 13.3% in May.

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Weekly Jobless Claims

In a separate report, the Labor Department said Thursday that initial jobless claims rose by 1.427 million. The print marked the 15th straight week in which initial claims remained above 1 million and came in higher than expected by economists.

The data also showed the number of continuing claims – the number of people receiving unemployment benefits for consecutive weeks – rose to 19.29 million, an increase of about 59,000.

Short-Term Outlook

The two reports drove the price action on Thursday. One pointed toward an improving economy, which would dampen the need for additional fiscal and monetary policy stimulus. This was bearish for gold. The other indicated the economic recovery could slow down as a resurgence in COVID-19 cases could lead to a fresh round of lockdowns and other restrictions that could produce another surge in unemployment.

The Non-Farm Payrolls data is stale data. It’s based on conditions in June. So traders aren’t going to be reacting to it moving forward. The main focus for gold traders will be the weekly initial claims reports. They will offer clues as to the strength of the economy. Rising weekly unemployment figures should underpin gold prices.

It is possible that we’ve seen the best unemployment data in the form of the June report for several months.

Gold is likely to continue to trade the way it has been since April with investors buying dips and aggressive short-term traders trying to trigger a breakout to the upside. If there is going to be a huge spike to the upside, it will likely be in reaction to an unexpected event like the Fed saying it is considering negative interest rates. While we’re waiting for something that may never take place, continue to buy the dips. Slow and steady wins the race.

For a look at all of today’s economic events, check out our economic calendar.

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