Weekly Market Analysis / 27 September - 3 October 2021

Gold markets looking for floor ahead of all-important NFP

Will gold price sustain the comeback from multi-week troughs? The week saw gold witnessing massive volatility, despite limited first-tier US macro news, as Fed sentiment and US political drama led the way. An intensifying global energy crisis, the China Evergrande debt issue and the Fed’s tapering fears kept investors on edge, benefiting the safe-haven US dollar at gold’s expense. However, the quarter-end flows came to the rescue of gold, as the price managed to reverse most of its weekly losses, snapping three straight weekly declines.

  • Thursday’s rebound saves the day for gold after a terrible week.

  • Fed’s tapering calls, risk-off mood underpin the dollar, yields take a breather.

  • XAU/USD’s technicals are pointing to further downside potential. 

  • The FX Poll is showing Gold is unlikely to stage a substantial recovery.

What Happened Last Week

  1. In the first half of the week, gold price heavily suffered and reached seven-week lows at $1,722, as the previous week’s hawkish shift from the Fed drove the US Treasury yields through the roof while lifting the greenback alongside. The hawkish Fed expectations were reflective of the underlying economic optimism.

  2. US inflation expectations, measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, climbed to two-week highs near 2.40% on Tuesday

  3. Thursday’s upward revision to the US final Q2 GDP offset the rise in the Jobless Claims, pushing the dollar index to fresh yearly tops, as gold price held onto its rebound amid the worst week for the US stocks since March 2020.

News to Follow

  1. It is going to be a quiet start to the Nonfarm Payrolls week, with Monday dropping in the US Factory Orders, which is unlikely to have any impact on the Fed’s tapering expectations.

  2. Next of relevance for gold traders will be Tuesday’s US ISM Services PMI, with the employment sub-index in focus ahead of Wednesday’s ADP Nonfarm Employment Change. Comments from Atlanta Fed President Raphael Bostic will be closely followed for fresh hints on the Fed’s next policy action.

  3. On Thursday, the US Department of Labor's weekly Initial Jobless Claims report will draw some attention alongside New York Federal Reserve President John William’s speech.

  4. Friday will bring in the all-important US labor market report, with the headline NFP foreseen at 500K in September vs. August’s terrible print of 235K. The NFP data will be closely eyed, as it will indicate ‘clear’ progress of Fed’s maximum employment goal. Apart from the economic data, gold price will remain at the mercy of the dynamics in the yields and broader market sentiment. Meanwhile, investors will keep their eyes on the US political scenario and the unfolding global energy crisis.

Short-Term Outlook

  • The initial hurdle is located at $1,785 ahead of $1,810.

  • Below $1,750 could open the door for additional losses toward $1,730 below $1,720.