• 2023-03-11

Gold Price Forecast: XAU USD jumps on NFP bulls eye test of $1850

Gold price rallies on the knee-jerk after Nonfarm Payrolls. Gold price bulls eye a break of $1850 to take back control. Gold price had been moving higher for a third consecutive day on Friday but the yellow metal was on track for a weekly fall as prospects of further interest rate hikes dented the precious metals allure while traders awaited a US Nonfarm Payrolls report. The Nonfarm Payrolls report has arrived as follows: US Nonfarm Payrolls US change in Nonfarm Payrolls Feb: 311K (exp 225K; prev 517K). REVISIONS - US Change in Nonfarm Payrolls Feb: 311K (exp 225K; prev 517K; prevR 504K). US Unemployment Rate Feb: 3.6% (exp 3.4%; prev 3.4%). US Average Hourly Earnings (MoM) Feb: 0.2% (exp 0.3%; prev 0.3%). Average Hourly Earnings (YoY) Feb: 4.6% (exp 4.7%; prev 4.4%). On the knee-jerk Gold price has rallied to a fresh corrective high near $1845 as markets price out the odds of a 50 basis point rate hike from the Federal Reserve this month. The main disappointments come in the Unemployment Rate that might have been expected to remain unchanged at a historically low level of 3.4%; while average hourly earnings were a big disappointment also. However when combined with yesterdays JOLTS whereby the Federal Reserves favorite gauge of labor demand strength the vacancies-over-unemployed ratio ("V/U ratio") these reports do not bode well for a Fed that is hoping for a meaningful slowing of the labor market. The analysts at TD Securities explained that yesterday the V/U ratio remained at a historical high of 1.9 vacancies per unemployed person. In terms of quits the quits rate did decline to 2.5% a two-year low but the lay-offs rate remained quite low at 1.1% and in line with what weve seen in 2022. Overall a robust report in line with continued labor market strength the analysts argued. Nevertheless the Nonfarm Payrolls has missed the mark in some key areas although this could be regarded as a mean-revert in February after the gangbuster report that saw job creation surge to an unexpected 517k in January. In the previous session Jobless Claims surprised to the upside during the first week of March jumping to above the 200k level for the first time in 8 weeks. The series printed 211k up from 190k. This data took some sting out of the Federal Reserve chair Jerome Powells hawkish tones when he testified to Congress and warned that a 50 basis point hike was not off the table. However it is worth noting that the average for claims in 2018-19 was 220k so the series still remains somewhat below the pre-Covid trend. Fed funds futures had already been showing that investors had decreased the likelihood of a 50bp hike by the Fed in March to 56% after being as high as 75% following Powells speech this week.