Gold Continues to Set Records and US Employment Data Will Determine the Path

Gold prices are poised for their biggest weekly jump in five months on the last day of the week, Friday, hovering near an all-time high, as Federal Reserve Chairman Jerome Powell’s comments boosted bets on a mid-year rate cut, ahead of the US jobs report later today.

Powell confirmed that the Fed is “not far” from gaining the confidence it needs in falling inflation to start cutting rates, which he said is likely to happen in the coming months. Lower interest rates enhance the attractiveness of the yellow metal, which does not generate income.

The dollar is on track for its biggest weekly decline this year, making gold cheaper for holders of other currencies.

Gold and the dollar now

·Gold futures are now up 0.16% to $2168 an ounce. Spot gold is up about 0.06% to $2161 an ounce. , remaining close to a record high of $2164.09 hit on Thursday. On the other hand, the dollar index is up about 0.08% to 102.852 points.

Other metals

Platinum fell 0.3% in spot trading to $916.48 an ounce. Silver was flat at $24.32. Palladium rose 0.5% to $1039.07. The three metals are on track for weekly gains.

Important data expected today

According to the global economic calendar, the US employment report will be released today, Friday, which provides strong evidence about the health of the US labor market and is one of the main indicators that the Federal Reserve relies on to determine the monetary policy tools appropriate for economic developments in the country.

The report shows the number of jobs added or lost by the non-farm sector in February, as well as the unemployment rate in the United States, and is expected to have a significant impact on the currency and stock markets.

The report will also be an important reference for investors and traders in financial markets, as it will determine the existing probabilities about the future of interest rates in the United States. The importance of this report has increased, as it comes after the testimony of the Federal Reserve Chairman “Jerome Powell” before Congress, which was less aggressive than expected in the markets.

US Nonfarm Payrolls report

If the jobs report shows strong data, the pressure on the Federal Reserve will continue, which will reduce the pricing of futures contracts for the probability of cutting US interest rates in May and June. The Nonfarm Payrolls report will be released by 13:30 GMT.

Expectations:

The US economy is expected to add 198,000 new jobs in February, down from 353,000 in January. The unemployment rate is expected to remain stable at 3.7%. Average hourly earnings are expected to rise by 0.2%, down from 0.6% in January.

Implications:

If the US jobs data comes in weak below market expectations, it will be a negative sign for the resilience of the US labor market and will reduce the pressure on the Federal Reserve. Accordingly, the pricing of futures contracts for the probability of cutting US interest rates by 25 basis points in May will increase from 25% to about 50%, and the probability of cutting in June will increase from 74% to 95%.

As a result, the US dollar exchange rate against a basket of global currencies will decline, US bond yields will fall, and stocks on Wall Street will rise. If the data comes in hot, better than expected, the pricing of futures contracts for the probability of cutting US interest rates by 25 basis points in May will decline from 25% to 10%, and the probability of cutting in June will decline from 74% to 50%. At that time, the US dollar will rise in the foreign exchange market, with US bond yields recovering and stocks on Wall Street falling.

Euro hits two-month high after hints of European rate cuts in June

The euro rose slightly in the European market on Friday against a basket of global currencies, extending its gains for the sixth straight day against the US dollar, hitting a two-month high, on track for its biggest weekly gain in 2024, after the European Central Bank hinted at a rate cut in June.

Markets had been leaning towards a European rate cut in April, but European Central Bank policymakers said they needed to see more evidence of inflation slowing sustainably before moving on with monetary easing.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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