Is that the end of the bulls’ story for now?
The gold price rose on Wednesday and Thursday after Fed decisions and USD weakness, but we have many signs there that it can be the end for now, and seeing the gold price above 2,000 US dollars, even though it seems probable, takes more time. However, if NFP numbers had missed expectations, then things could change.
On Friday and ahead of nonfarm payroll numbers, other economic readings showed some strength in the labor market. In continuation of these robust data from the labor market, Friday’s NFP numbers surprised market participants by 517K newly created jobs. According to the labor department, nonfarm payrolls grew by 517,000 through the middle of January, abruptly snapping a four-month trend of slowing job gains. The market expected a further slowdown to 185K, which was supposed to be the slowest job growth in almost two years. Interestingly, with the jobless rate falling to a historically low of 3.4% of the workforce, the labor force participation rate ticked up to 62.4% from 62.3%.
The FOMC statement also saw that members are confident about labor market conditions. While inflation has been decreasing and Fed officials also mentioned that it could continue falling further, investors’ main concern is that if the labor market continues its resilience, it can keep higher price pressures for longer.
It is not just about the labor market. US factory orders also rebounded in December after weakness seen in November. Just in December, and after November -a 1.9% fall, the monthly rate of factory orders rebounded strongly to 1.8%, a new high since June last year. From the perspective of sub-data, the monthly rate of factory orders excluding defense raised by 2%, while it fell by -2.2% in November. Also, the monthly rate of factory orders excluding transportation fell by -1.2%, lower than last month’s -0.8% fall.
Given relatively high inflation and acceptable economic conditions, Fed can keep raising interest rates and hold the higher rates this year, which is a pessimistic scenario for gold and metal markets.
From the technical point of view, we still have the $1,840 as strong support to see the gold in a clear downtrend, but the upward trend is over.