Weekly Market Analysis / 4 - 8 October 2021

Gold on the back foot as Non-farm payrolls fall below expectations

After ending the previous week on a firm footing, the XAU/USD pair continued to edge higher on Monday and reached a 10-day top of $1,770. Nevertheless, gold struggled to extend its rebound amid dollar resilience and formed a horizontal trading channel with a lower limit of $1,750. Although the pair broke above that channel on Friday and touched a 15-day high of $1,781 with the initial reaction to the disappointing September jobs report from the US, it retreated below $1,770 ahead of the weekend.

  • Gold spiked above $1,780 on Friday but lost its bullish momentum.

  • Despite the disappointing September jobs report, dollar stays resilient.

  • Focus shifts to US September CPI inflation data.

What Happened Last Week

  1. The only data from the US showed on Monday that Factory Orders increased by 1.2% on a monthly basis in August but this reading received little to no market reaction. 

  2. On Tuesday, the ISM Services PMI arrived at 61.9 in September, compared to analysts’ estimate of 60, but this print got largely ignored by market participants.

  3. On Wednesday, the Automatic Data Processing (ADP) Research Institute announced that private sector employment in the US rose by 568,000, surpassing the market consensus of 428,000.

  4. The benchmark 10-year US T-bond yield gained more than 3% on Thursday and reached its highest level in more than four months above 1.6% on Friday.

  5. Finally, the US Bureau of Labor Statistics reported that Nonfarm Payrolls (NFP) rose by 194,000 in September. This reading missed analysts' forecast of 500,000 by a wide margin and triggered a USD selloff. However, the underlying details of the publication revealed that August's print got revised higher to 366,000 from 235,000 and the Unemployment Rate declined to 4.8% from 5.2%. The US Dollar Index, which dropped to a daily low of 93.94 after the NFP data, didn't have a difficult time rebounding above 94.00 and capped gold's upside.

News to Follow

  1. There won’t be any high-impact data releases at the start of the week. On Tuesday, the August jobs report from the UK and the ZEW Survey from Germany will be featured in the European economic docket, which are unlikely to have a significant impact on XAU/USD’s movements.

  2. On Wednesday, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for September. Investors forecast the annual CPI to tick up to 5.4% from 5.3% in August.

  3. On Thursday, the US Department of Labor’s weekly Initial Jobless Claims data will be looked upon for fresh impetus ahead of Friday’s Retail Sales report, which is anticipated to show a modest contraction in September.

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.