Gold Firms Ahead of U.S. Jobs Data

Stock charts

Gold prices barely moved on Wednesday as the market wait for the U.S. jobs report due on Friday. Labor market recovery is one of the key factors considered by the Federal Reserve in its monetary policy and tapering decision. The yellow metal held steady despite the rebound of the U.S. dollar. The greenback rose 0.1% but remain close to an almost four-week low hit yesterday.

Spot gold is currently trading at $1,809.82 per ounce as of 0810 GMT.

OANDA senior market analyst Jeffrey Halley said a report around 700,000 or less would be positive for the bullion. But a figure of more than one million jobs would be bearish for gold because it would put the focus on tapering the Fed’s economic support. He noted that the yellow metal does not have the momentum to trade away from its 100- and 200-day moving average. Economists surveyed by Reuters predicted nonfarm payrolls growth of 750,000 in August.

DailyFX currency strategist Ilya Spivak argued that the market appears to recognize that the Fed is headed towards the direction of winding back stimulus. Fed Chair Jerome Powell confirmed last week that tapering could begin this year. It is only the interest rate hike that remains uncertain. But a robust job report on Friday would help the Fed with its decision.

Meanwhile, the Conference Board reported that U.S. consumer confidence plunged to a six-month low in August. The index fell to a reading of 113.8, failing to meet economists’ forecast of 124.0. The decline in consumer sentiment is attributed to rising inflation and COVID-19 infections.

In the European Union, inflation soared to a 10-year high in August. Consumer prices in the eurozone rose 3% this month and are way above the European Central Bank’s 2% target. In the region’s largest economy, Germany, inflation is expected to reach 5% in the coming months.

ECB policymaker Robert Holzmann called on the central bank to discuss the matter next week and start reducing its emergency bond purchases in the next quarter. Bank of France Governor Francois Villeroy de Galhau agreed and said the ECB should consider improvements in financing conditions when discussing the tapering of economic support.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, fell 0.2% yesterday to 1,000.26 tons. It is the lowest level in almost 16 months and reflects market sentiment.