The gold market is sharply higher Friday as the bulls attempt to continue climbing a wall of worry. The yellow metal is higher after the key data point of the month, the jobs figures for December, were released. December saw a rise of 223,000 jobs while estimates were calling for a rise of 200,000 jobs. The data is upbeat, but not overly strong, and may fall into the camp of the policy doves. The figure is lower than that of November, in which the market saw a gain of 263,000 jobs. Markets seem to be breathing a sigh of relief that the non-farm payrolls were not stronger than they were or beating expectations by even more. The jobs data is unlikely to have much if any, effect on the Fed and its plans for interest rates in the months ahead. The ADP jobs report, released Thursday, handily beat expectations and may have had some market participants worried the non-farm payrolls would do the same. As is often the case, however, the two reports did not match up very well.
The goldilocks jobs data Friday may keep markets guessing about the Fed’s intentions for the months ahead. After raising rates by only 50 points last month instead of 75, the Fed has already signaled it intends to slow the pace of rate hikes in the months ahead. The Fed also suggested, however, that rates may need to remain higher for longer. The seemingly mixed message may keep investors and volatility awake as the new year gets rolling. While the terminal rate is likely to keep moving higher, possibly topping out around 5.25%, data such as that seen today may keep markets guessing. Until the Fed provides more clarity about its intentions, the market may be influenced by inflation data and the war in Ukraine. If the inflation data continues to show signs of some easing, markets could head higher on the hopes of a more dovish Federal Reserve. If the inflation data comes in hotter than expected, however, markets could see significant selling and volatility as worries over a hawkish Fed may take center stage.
The gold bulls have done a good job of putting some distance between the market and the $1800 level. Today’s $30 per ounce gain puts the market within striking distance of the $1900 level which may be the next major obstacle for the bulls. The bears will look to produce a close below the $1800 level and then target the $1700 breakout level. A close below $1700 would put the market in significant jeopardy of declining to the $1500 level before finding willing buyers.
For the time being, the trend for gold remains higher and that is the path of least resistance. Any dips toward the $1800 level will likely be bought aggressively and the market may remain in a trading range until more is known about the Fed’s intentions for 2023.