In light of labor market developments, the gold market has remained in a stable holding pattern, currently trading at $1,877 an ounce, up from the previous day. Technically, both gold and silver futures have gained momentum this week and remains bullish, with gold having resistance levels at $1,900 and $1,915, and support levels at $1,880 and $1,873. Silver futures have resistance levels at $22.65 and $23, with support levels at $22.12 and $22. Still down sharply from last week and despite the fluctuations in the labor market, the gold market has maintained its stability below the $1,900 an ounce threshold. Future traders will look for an April close above the $1,975 resistance level.
The United States labor market has been a focal point of economists as it holds a significant influence on the Federal Reserve’s monetary policy. Today, the U.S. Labor Department reported an increase in weekly jobless claims by 13,000 to 196,000, which missed expectations. Although the latest data showed a rise in claims, the four-week moving average, viewed as a more reliable measure, slightly fell to 189,250. Continuing jobless claims were at 1.688 million during the week ending January 28, a rise of 38,000 from the previous week.
Despite the recent uptick in jobless claims, the U.S. labor market has managed to defy expectations of a slowdown, as 517,000 jobs were ‘created’ last month according to the Bureau of Labor Statistics. It’s important to keep in mind that the BLS had released a number of data revisions as it relates to reclassification of titles and sectors such as seasonal employment. And when we look at the data closer, its easy to see how the market actually lost more full-time employees while adding part-time employees. Federal Reserve Chair Jerome Powell noted that the central bank would need to see softness in the labor market before it would consider loosening its aggressive monetary policy stance.
Looking to next week as top officials, including New York Fed President Williams and Atlanta Fed President Bostic, are advocating for a higher peak interest rate in response to the recent job growth in the U.S. With the next Consumer Price Index (CPI) data set to be released next Tuesday, the market is eagerly awaiting its impact on the economy. While some predict a decrease in inflationary data, which could boost risk assets and hurt the dollar, others are hoping for an increase in the U.S. CPI data. If the data comes in higher than expected, we could see a rally in U.S. Treasury yields and a strengthening of the dollar. This could put pressure on the gold market, as gold is a non-interest-bearing asset.
As the Federal Reserve’s policy shifts, the market is predicting a peak rate of 5.1% in comparison to the current rate of 4.6%. The pivot point is expected to occur in August. At the end of the day, the gold market’s stability in the face of unexpected labor market developments is a testament to the precious metal’s enduring value and reliability as a safe haven investment. Whether it’s political turmoil, economic instability, or a global pandemic, gold continues to prove its worth as a dependable store of wealth. It’s an exciting time for economic analysis and forecasting, and we’re all buckling up for the economic roller coaster ahead!
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