Gold sell

The labor market is not weakening as fast as the Fed would like

10 April 2023 156
The labor market is not weakening as fast as the Fed would like

Gold price hit the first target for the correction, falling below the level of $2,000 per ounce at the start of trading on Monday. As it was indicated in the previous forecast, technical signals of a reverse were stronger than fundamental attractiveness of the most widely used precious metal. However, according to the data on the U.S. labor market released on Friday, the correction of gold prices may not be limited by the current decline.

 

Despite Friday being a day off for the U.S. and most European countries, many market participants were in anxious anticipation of the data from the U.S. Department of Labor. Published figures on job openings and unemployment rate were not too different from the consensus forecasts of most analysts, but it still could trigger a more significant decline in gold prices.

 

There were 236 000 new jobs created in March in the U.S. while the expected number was 239,000 and February figures of 326,000. The unemployment rate declined to 3.5%, though it was forecasted to remain unchanged at 3.6%. The U.S. labor market shows signs of weakening, but it is still not as weak as Fed officials would like it to be. Thus, the time to stop the monetary tightening cycle is still to come.

 

Michael Brown of TraderX believes that the data on a robust labor market will be taken by the Fed as a signal for another 0.25% interest rate hike at the May 3 meeting. After the jobs data was released, U.S. Treasury yields rose and the dollar strengthened. The situation for gold became less favorable.

 

If gold prices stay above 2,000, the next target for the correction will be the level of $1,980. The Stochastic lines have crossed and given a sell signal. It increases the probability of continued decline in gold prices.

The following trading strategy can be suggested:

 

Sell gold at the current price. Take profit — 1,980. Stop loss — 2,010.

 

Traders can also use Trailing stop instead of a fixed Stop loss at their discretion.

This content is for informational purposes only and is not intended to be investing advice.

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