Gold Prices Surge Following Weaker U.S. Jobs Data
Gold and silver prices experienced a significant surge in early U.S. trading on Friday, following the release of disappointing U.S. economic data. The latest report has bolstered the argument for a more dovish approach by the Federal Reserve, with increased speculation that interest rates may be cut sooner rather than later. December gold futures climbed by $34.40, reaching $2,514.70 per ounce—a two-week high and approaching the record high. Similarly, September silver futures rose by $0.668, reaching $29.155 per ounce.
Impact of the U.S. Jobs Report
The U.S. Labor Department’s monthly jobs report for July revealed a key non-farm payroll increase of 114,000, significantly below the expected 185,000. This follows a downward revision of June’s non-farm job gains to 179,000. The weaker-than-expected job numbers have intensified discussions about the Federal Reserve’s monetary policy approach.
David Morrison of Trade Nation noted before the jobs report release that the Fed might be “behind the curve” regarding loosening monetary policy. He suggested that September could be the earliest opportunity for a rate cut, given the recent data releases indicating a rapidly cooling economy. Morrison’s comments gained further validity post-report, highlighting potential recession fears rather than progress toward the Fed’s 2% inflation target.
Safe-Haven Demand and Global Tensions
Gold is also benefiting from safe-haven demand amid escalating Middle East tensions. Iran’s vow to retaliate against Israel following the killing of a top Hamas official on Iranian soil has heightened geopolitical uncertainties. Additionally, a dovish stance by the Federal Reserve this week has contributed to the precious metal’s appeal. The World Gold Council reported that central bank gold holdings have risen by 6% year-on-year in the second quarter, underscoring continued demand.
Market Reactions and Broader Economic Indicators
Overseas stock markets responded negatively to the economic data. Asian and European indexes were significantly lower following Wall Street’s Thursday sell-off, with Japan’s Nikkei index suffering its worst day since the onset of the pandemic in 2020. U.S. stock indexes are also poised for a lower opening, further influenced by Thursday’s weak manufacturing purchasing managers index (PMI) for July, which has unsettled market sentiment.
In other key markets, the U.S. dollar index fell sharply, hitting a seven-week low, while Nymex crude oil prices dropped to a two-month low of around $75.00 per barrel following the jobs report. The benchmark 10-year U.S. Treasury note yield also declined, currently standing at 3.827%.
Technical Analysis and Future Outlook
From a technical standpoint, December gold bulls hold a solid near-term advantage. The next major upside target for gold is to close above the contract high of $2,537.70, with further resistance anticipated at $2,550.00. On the downside, initial support is seen at the overnight low of $2,479.50, followed by $2,465.00. Wyckoff’s Market Rating for December gold stands at 8.5, indicating a strong bullish trend.
Conversely, September silver futures show a slight bearish advantage in the near term. Despite being in a downtrend on the daily chart, silver prices are teetering on a potential reversal. The next upside target for silver bulls is closing above the solid technical resistance at $30.00, while the bears are aiming to push prices below the July low of $27.45. Immediate resistance is at $29.50, with further resistance at $29.63, and support levels at the overnight low of $28.275 and then $28.00. Wyckoff’s Market Rating for September silver is 4.5, reflecting a modest bearish outlook.
Conclusion
The surge in gold and silver prices underscores the market’s reaction to weaker U.S. economic data and heightened geopolitical tensions. As investors navigate these turbulent waters, the precious metals are proving to be reliable safe havens, bolstered by speculation of a more accommodative Federal Reserve and ongoing global uncertainties. With central banks continuing to increase their gold holdings and economic indicators signaling potential challenges ahead, gold and silver remain attractive options for those seeking stability and diversification in their portfolios.
