The gold market is higher today as the non-farm payrolls data was a bit better-than-expected. According to the report, the U.S. added 315,000 jobs in August. Consensus estimates were looking for an increase of 295,000 jobs. While this headline figure is solid at first glance, the report did also contain some negatives. Both June and July were revised lower, with June seeing a sharp revision of over 100,000 jobs.
On the plus side was wage growth not growing as quickly as expected. Wages were up .3% in August while estimates were calling for a rise of .4%. The slower wage growth could potentially point to inflation easing a bit and possibly already having peaked. While this may at first appear to be bearish for gold, it could also be construed as being bullish if the Fed does not have as much reason to continue its aggressive tightening.
The Fed is still quite likely to tighten rates later this month at the next FOMC meeting. The Fed Funds rate is seeing heavy betting to be increased by another 75-basis points when the Fed does meet. Nearly all discussions of a Fed pivot away from the inflation fight have dissipated. Chairman Powell has tried to make it abundantly clear that the central bank sees inflation as the biggest risk to the economy and will look to get it back to desired levels regardless of the consequences.
Gold and other markets could find themselves trading range bound until the next FOMC meeting this month. Gold has seen its market volatility largely dry up in recent weeks, but that could change if the Fed does or says something unexpected in a few weeks when it meets again. In the meantime, the $1700 and $1800 levels are still technically significant.
The bears took prices below $1700 on Thursday but failed to maintain that action on Friday. The lack of follow through is nothing new for gold, however, and at this point may be expected. The bears do seem to have the edge, however, despite Friday’s market strength. This could lead to another test of $1700 next week If able to produce a close below this level, the bears would be in firm control and may embark on a fresh leg lower in price.
How low gold could possibly go is another question entirely. The long-term narrative for gold remains highly bullish. The U.S. and other nations are riddled with massive, unpayable debt. Paper currencies will continue to lose value as they have done for millennia. These and other issues may keep gold on the rise over the long run. Gold may become the only reliable and useful form of money left on the planet at some point. When it does, its value is likely to be sharply higher than current levels. Gold at $3000, $5000 or even $10,000 per ounce or more is not only not out of the question but increasingly likely.