Taking a look at the US Labour report there is a chance that gold can recover it’s recent losses if we see a big miss in the report. Remember that the Fed sees the labour market through an inflationary or deflationary lens. If the labour market is strong, that is seen as inflationary. If the labour market is weak, that is seen as deflationary. The inflation picture (being higher) has been driving yields and the USD higher recently ever since the Fed had a higher for longer rate narrative.
So on Friday here is what to look for. If the US non-farm payroll comes in below 90,000 and the unemployment rate comes in above 3.9% then watch for significant gold upside. The market wants to find a reason for the recent surge in yields and the dollar to pull back. A weak jobs report would be just the reason.
From an event bias gold tends to gain out of the US labour report with an average return of nearly 0.5% in the 4 days after the report. So, with gold having sold off heavily on the higher rates fro longer narrative would a weak jobs report give the catalyst that gold needs for a sharp retracement higher?
Major Trade Risks:
The major trade risks here is that the US jobs print comes in strong.
Remember don’t just trade it, Seasonax it!