NFP Reaction: Gold Ready to Close Best Week in More Than a Year

Gold is ready to close the week with gains not seen in over a year. Speculations of a Fed’s rate cut is fueling XAU/USD bulls.
Mauricio Carrillo
NFP Reaction: Gold Ready to Close Best Week in More Than a Year
NFP Reaction: Gold Ready to Close Best Week in More Than a Year

Gold is trading positive on Friday and ready to finish its best week since March 2018 as investors are betting on safe havens like the yellow metal but also leaving behind the dollar amid speculations that the Fed will cut rates soon.

The employment report in the United States disappointed market as it showed a weaker than expected job creation and wage increase in May. Data fuels speculations of a rate cut.

Earlier this week, speculations of a rate cut as soon as July were raised as St Louis Federal Reserve President James Bullard said that an interest rate cut “may be warranted soon” due to different factors including risks to the economic growth in the United States.

Then, investors left behind the dollar, and it opened the door for Gold bulls to take control of the bullion. Then, XAU/USD performed 2.5% gains in the last five trading days.

Precious metals round-up

XAU/USD is trading in consolidation mode above 1,330 but below the 1,340 area. Gold is ready to close its best week since March 2018.

Silver is trading quiet around the 200-day moving average at 14.90, as the unit is consolidating weekly gains.

Copper is falling on Friday with the unit losing all Thursday’s recovery and testing 2.615 support. Watch out for the 2.600 level.

Platinum is resuming its decline after a brief rebound performed on Thursday. XPT/USD is now testing the 80.00 level as the unit is losing all weekly gains but still logging its first positive week in almost two months.

Palladium is positive on the day but struggling to maintain gains as the unit is contained by the 50-day moving average level at 1,362. XPD/USD seems ready to close the week with benefits and consolidating levels above the 1.300 level.

As a matter of context, the dollar index is consolidating levels around below the 97.00 area as the Greenback is under pressure amid speculations of a possible rate cut soon by the Fed.

Nonfarm payrolls disappoint the market, dollar down

As mentioned before, the employment report in the United States disappointed markets as nonfarm payrolls showed that the US created only 75K new jobs in May, well below 185K expected by market. Besides, April data got a revision down to 224K from 263K previously announced.

More disappointing was the wage increase as the average hourly earnings rose 3.1% in May, below 3.2% expected by markets. Finally, US workers worked less than anticipated at the average weekly hours were 34.4 hours, below 34.5 anticipated by experts.

The unemployment rate remains unchanged at 3.6%, but labor participation was 62.8%, below 62.9% expected.

Long story short, people in the United States worked fewer hours, gain less money than expected, and at the top of it, they were fewer new hirings. Bad report.

DXY down to lows since March

As reported earlier, any number below expectations in the employment report would fuel speculations of a rate cut by the Fed. So, it did happen today, and the Greenback is suffering the consequences.

DXY is currently trading 0.37% negative on the day at 96.65, its lowest level since March 27. The unit is now heading to the 200-day moving average at 96.48.

Gold jumps after Nonfarm payrolls

XAUUSD daily chart June 7 Post NFP

Gold is trading positive after the nonfarm payrolls report in the United States. A disappointing report fueled rate cut speculations, sending the dollar down and opening the door for gold gains.

After the NFP number, XAU/USD jumped to fresh highs since February 20 at 1,345, just ahead of 1-year highs of 1,346.

Gold is currently trading at 1,344, posting 0.65% daily gains so far today. The overall belief now is that gold will trade positive in the middle term amid speculations on a Fed rate cut; however, remember that today is Friday and a regular profit taking should take place later on the day.

To the upside, if the metal breaks above the 1,346 area, check for 1.350 and 1,365 as next resistances.

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