On Friday, September 6th, the spot gold closed at $2516.36 per ounce, basically unchanged from the previous trading day's closing price. It briefly reached a high of $2529.04 during the session. The mixed U.S. employment report released on Friday has led to differences in the market's expectations for the magnitude of the Fed's rate cut later this month, resulting in gold's continued volatile performance.
According to the U.S. Department of Labor, non-farm payrolls increased by 0.142 million in August, lower than the Reuters survey's expectation of 0.16 million. The July increase was revised downwards to 0.089 million. However, the unemployment rate was 4.2%, in line with expectations and lower than the previous month's 4.3%. Aakash Doshi, Head of North American Commodities at Citigroup Research, said that there is still a lot of controversy among gold traders regarding whether the Fed will cut interest rates by 50 basis points or 25 basis points on September 18th. The gold price is also reacting to this. The controversy stems from the significant downward revisions to the non-farm payroll data for June and July in the Friday non-farm report, which has led the market to believe that signs of a recession in the U.S. economy are becoming increasingly apparent. However, according to the CME FedWatch Tool, traders currently believe that there is a 73% probability of a 25 basis point rate cut this month and a 27% probability of a 50 basis point rate cut. This indicates that the chances of the Fed cutting interest rates by 50 basis points this month are not high. Nevertheless, the fact remains that the Fed will begin its interest rate cut this month and the high-interest rate cycle of the U.S. dollar will reverse, which is undisputed. New York Fed President Williams said that a rate cut soon will help maintain a balanced job market. Fed Board member Bullard also said that the "time has come" to start a series of rate cuts and expressed an open attitude towards the magnitude and pace of the cuts. This week, there will also be the release of the U.S. CPI report, which is the final inflation report before the Fed's policy meeting on September 17th-18th, and may influence expectations for a rate cut by the Fed. If there are more signs of cooling price pressures, it will strengthen the bet on a larger rate cut in the U.S., which would be a welcome opportunity for zero-yield gold. However, caution is also needed against unexpected strong inflation, which could lead to increased pressure for a gold correction.
From a technical perspective, looking at the daily chart, gold is still in a wide range of volatility. The key resistance level above is still the historical record high of $2532, and the strong support below is the low of $2473 reached last week. In terms of technical indicators, the short-term outlook for gold bulls does not appear to be favorable, as there are signs of a potential double top formation. If the aforementioned low of $2473 in the high-volatility range is broken, caution should be exercised as gold enters a period of downward correction. The only hope for further ascent is to break through the record high of $2532.
Wang Gang, Bank of China Guangdong Branch
For personal views only, not representative of the views of the organization.