The US Jobs Report for January has exceeded market expectations, with the addition of 353,000 new jobs compared to the forecasted 180,000. Additionally, December’s figures were revised higher to 333,000 from 216,000. Average hourly earnings year-on-year rose to 4.5%, surpassing the forecasted 4.1%. The robust performance of the US labor market provides the Federal Reserve with more flexibility to assess inflation data before considering any interest rate adjustments. The previously anticipated March rate cut now appears less likely, with projections showing a total of 125 basis points of cuts in 2024, down from around 150 basis points at the beginning of the year.
Following a week of significant economic data and events, including earnings reports from major tech companies, the upcoming week is expected to be quieter, with limited events to impact risk sentiment. Federal Reserve commentary is anticipated to take center stage now that the FOMC blackout period has concluded.
The prolonged status quo in US interest rates poses challenges for non-interest-bearing assets like gold in the short term. While geopolitical tensions in the Middle East may provide a haven boost, the dominant driver remains the interest rate backdrop.
Gold is currently testing prior horizontal support around $2,033/oz., along with the 20- and 50-day simple moving averages. A series of higher lows has been disrupted, potentially leading the precious metal to test support at $2,010/oz. and $2,000/oz. In the coming days, breaking recent highs up to $2,065/oz. could prove challenging.
Retail trader data indicates a net-long position of 53.76%, suggesting a potential continuation of the downward trend in gold prices. However, contrarian views often consider crowd sentiment, and the higher number of net-long traders could imply a potential for gold prices to fall further.
