Gold Price Fundamental Daily Forecast – Traders React Positively to ‘Not Too Strong, Not to Weak’ NFP Report

Gold futures closed higher on Friday, bolstered by a drop in Treasury yields and a weaker U.S. Dollar after a major U.S. jobs report came out mostly in line with pre-report estimates. Nonetheless, worries about rising interest pushed gold prices lower for a third consecutive week.

On Friday, December Comex gold settled at $1722.60, up $13.30 or +0.77%. Additionally, the SPDR Gold Shares ETF (GLD) finished at $159.27, up $1.40 or +0.89%.

The response by the overall market surprised most traders with some calling it a “goldilocks” report, meaning it didn’t suggest weakness, but it’s wasn’t too strong to prompt a supersized rate hike by the Fed. In fact, as of Friday’s close, the chances of a 75-basis-point rate hike by the Fed on September 21 had fallen from 74% (pre-NFP report) to 56% (post-NFP report).

Non-Farm Payrolls Results

Non-Farm Payrolls rose solidly in August amid an otherwise slowing economy, while the unemployment rate ticked higher as more workers rejoined the labor force, the Bureau of Labor Statistics reported Friday.

The economy added 315,000 jobs for the month, just below the Dow Jones estimate for 318,000 and well off the 526,000 in July and the lowest monthly gain since April 2021.

The unemployment rate rose to 3.7%, two-tenths of a percentage point higher than expectations, largely due to a gain in the labor force participation rate to 62.4%, tied for the highest level of the year.

Wages continued to rise, though slightly less than expectations. Average hourly earnings increased 0.3% for the month and 5.2% from a year ago, both 0.1 percentage point below estimates.

2-year Treasury Yield Declines from 14-year High after Jobs report Comes in as Expected.

The yield on the 2-year Treasury note ticked lower on Friday after August’s jobs report came in near expectations and eased some fears that a hot labor market would force the Federal Reserve to continue hiking rates at an aggressive pace in order to tame surging prices.

Dollar Dips but Set for Weekly Gain

The dollar eased from a 20-year high on Friday after data showed the pace of U.S. hiring rose more than expected in August, but wage growth moderated and unemployment ticked higher, giving the Federal Reserve some wiggle room when it raises interest rates later this month.

Short-Term Outlook

Gold traders are using the mixed Non-Farm Payrolls report as an excuse to book profits after steep losses throughout the week. The U.S. Dollar Index hit a 20-year high last week and the 2-year Treasury yield reached its highest level since 2007.

These types of moves don’t turn around in a day. After a short-term, short-covering rally, we see gold prices headed lower because of the potentially of much more aggressive Fed tightening. Once support breaks around $1696.00, gold could plunge quickly to $1600.00.