The gold bulls are taking a run at higher prices once again today. Spot gold prices are now firmly back above the key $1850 level and are approaching the $1870 area. If the bulls are able to maintain the day’s gains, there could be a run towards the $1900 level in the days ahead. A breach above $1900 on a closing basis could pave the way for even more gains in the days ahead.
The major driver for higher gold today is likely declining bond yields and a weaker dollar. The ADP National Employment report may also be providing some fuel, as it showed a less-than expected rise of 128,000 jobs. Although the ADP report has not shown much reliability as a precursor to Friday’s non-farm payrolls data, it could potentially point to a weaker-than -forecast showing for the largest data piece of the month. Should the non-farm payrolls data disappoint, it could send stocks lower while also providing gold a boost. If the figure beats expectations, however, stocks may rally while gold declines.
As investors parse the economic data stream looking for clues about what the Fed may or may not do, they will have plenty to consider on this busy economic data release day. Today, markets will get the latest readings on several key data points, including the ADP national Employment report, the Challenger job-cuts report, weekly jobless claims, revised productivity and costs as well as manufacturing data. Weekly DOE data will also be released.
While all of these data points are important and have the potential to move markets, none of them has the power to move the market the way that Friday’s non-farm payrolls data does. It is expected that the total number of jobs created will come in around 328,000, a far cry from the previous month’s gain of 428,000. The unemployment rate is expected to see a slight dip, however, from 3.6% to 3.5%. The jobs data this month could have a special impact on markets as they await further action from the Fed. It is widely expected that the Fed will raise rates by at least 50-basis points at its next two consecutive meetings. Should a key data point, like the jobs figures, show a very large downturn, it could give the Fed reason to pause or take a slower approach. If the data is as expected or beats expectations, it could give the Fed the all clear to continue hiking aggressively.
Both the dollar and yields are a bit lower in early action today while crude oil is also weaker. Crude could see some fireworks, however, as there is an OPEC meeting going on today. The oil cartel is expected to raise its production levels and could even sanction Russian oil. If the cartel does not take any action, crude is likely to keep climbing as long as the war in Ukraine rages on.