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Temporarily, the US dollar stopped making gains in preparation for the reaction to the announcement of US jobs numbers tomorrow, which allowed the price of gold (XAU/USD) to recover slightly to the level of 1831 dollars per ounce before settling around the level of 1822 dollars per ounce at the time of writing the analysis. The losses of the downward trend in the price of gold this week reached the support level of $1815 per ounce, the lowest price in seven months.
- Stock markets received positive momentum from a decline in global crude oil prices after recent strong gains.
- According to US stock indices trading on Wall Street, the S&P 500 index rose by 0.8%, closing at 4,263.75.
- The Dow Jones index rose 0.4% to 33,129.55 points, and the Nasdaq index jumped 1.4% to 13,236.01 points.
- In general, stock markets have been facing difficulties since the summer under the weight of rising Treasury yields in the bond market.
As is well known, high returns undermine stock prices by pulling investment dollars away from stocks and into bonds. They also cripple corporate profits by making borrowing more expensive.
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According to trading, the yield on 10-year Treasury bonds, the focus of the bond market, withdrew from its highest level since 2007, falling to 4.71% early on Thursday from 4.80% late on Tuesday. Short-term and long-term yields also declined to allow for more positive momentum for the stock market.
Revenues declined after a few reports indicating a slowdown in the US economy. The first proposal for hiring by employers outside the government was much weaker last month than expected.
On Wall Street, this is currently good news because a calm US labor market may mean less upward pressure on inflation. This, in turn, could convince the Federal Reserve to ease US interest rates. Having already raised its key interest rate to the highest level since 2001, the Federal Reserve has indicated that it may keep US interest rates higher next year than previously expected. In contrast, Treasury yields rose as traders accept the new normal of markets with higher interest rates for a longer period.
The Fed is paying particular attention to the US labor market because excessive force there could push workers’ wages much higher, which it fears could keep inflation well above its 2% target. Yesterday’s report from ADP noted that private sector employers added 89,000 jobs last month, a sharper slowdown in hiring than the 140,000 jobs economists had expected.
The report does not have a perfect record of predicting what the US government’s most comprehensive jobs report, which will be released tomorrow, will say.
A second report on the economy said that growth in US service industries slowed slightly more than economists expected in September. Wall Street markets are also absorbing the ouster of Kevin McCarthy from the position of Speaker of the US House of Representatives. This unprecedented move likely won’t change much in the short term, with funding for the US government set to run until November 17. A shutdown would impact the US economy, increasing the risk of a recession, although financial markets have held up relatively well during previous shutdowns.
The general trend of the gold price psychological support is targeting $1,800. It may be lower than that, which at the same time is a good new opportunity to buy gold again.
Global geopolitical tensions and fears of economic recession may provide strength for gold if this coincides with a decline in the US dollar. On the other hand, according to the performance on the daily chart below, bulls will not regain control over the gold trend after the recent losses without moving towards the resistance levels of 1855 and 1880 dollars, respectively.
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