The surprise US jobs report on Friday showed that US employers added a third of a million more jobs than expected last month despite the high rates. Normally, this strength would be good news for the markets.
- For three trading sessions in a row, the gold price was exposed to strong selling operations that affected the support level at 1862 dollars an ounce, the lowest price in a month, a rebound from the resistance level of 1959 dollars an ounce, the highest price in nine months.
- The decline was primarily amid the strong gains of the US dollar after the job numbers were announced in America at the end of last week, which provided the impetus for expectations of raising US interest rates, despite what the US Central Bank did to reduce the size of the hike.
At the beginning of this week, US stock indexes on Wall Street pared more of their strong start to the year, adding to losses from the end of last week, driven by concerns about rising interest rates and inflation. By trading, the S&P 500 index fell by 25.40, or 0.6%, to 4111.08 in the second consecutive decline after a surprisingly strong report on the US jobs market, which affected the market’s hopes for easing US interest rates. The Dow Jones Industrial Average fell 34.99 points, or 0.1 percent, to 33,891.02 points, while the Nasdaq Composite Index fell 119.50, or 1 percent, to 11,887.45.
Some sharp action was once again in the bond market, as expectations are growing for the Federal Reserve to remain steady on keeping US interest rates higher for longer to combat inflation. It’s something that the Federal Reserve has been talking about for a long time, but also something that the market has been adamant about not fully believing.
And the two-year Treasury yield, which tends to track Fed expectations, jumped. It has increased to 4.47% from 4.29% late Friday and just 4.10% the day before. This is an important step for the bond market. The yield on the 10-year note, which helps set prices for mortgages and other important loans, jumped to 3.64% from 3.52% late Friday.
And higher rates slow the economy by design, in hopes of curbing household and business purchases that can fuel inflation. But they also raise the risk of a severe recession and hurt markets in the meantime.
The surprise US jobs report on Friday showed that US employers added a third of a million more jobs than expected last month despite the high rates. Normally, this strength would be good news for the markets. At the very least, that should mean higher sales for many companies. But it also raised concerns that a very strong labor market would keep inflationary pressures alive and force the Fed to keep interest rates higher for longer. This is in direct contradiction to the prevailing market hopes that cooling inflation may prompt the Fed to halt interest rate increases soon and then cut interest rates later this year.
According to the performance on the daily timeframe chart, a break occurred in the general trend of the gold price to bearish. The bears’ control will strengthen, and the technical indicators will move towards oversold levels, if the gold price moves towards the $1849 and $1830 support levels, respectively.
On the other hand, and for the same time period, the bulls will not control again, and expectations will return to the vicinity of the $1900 psychological resistance, without the gold price moving above the $1885 resistance again. The price of gold today will be affected by investors’ sentiment of risk appetite or not, in addition to the price of the US dollar, following new statements from US Central Bank Governor Jerome Powell.
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