FXT's foreign exchange sword points to gold prices soaring 100-day moving average

On Wednesday (August 30), spot gold fluctuated narrowly in the Asian session. It is currently trading near $1,936.50/ounce, not far from the nearly three-week high of 1938.04 set overnight. Tuesday, as weak labor market data in the United States cast doubt on the possibility of the Federal Reserve raising interest rates again, the dollar and U.S. bond yields plunged sharply, helping gold prices rise more than $15, breaking the key position of the 55-day moving average and refreshing the nearly three-week high. The short-term bullish signal is further strengthened. The market outlook is expected to further explore the resistance near the 100-day moving average of 1957.74.

The Labor Department's Job Openings and Labor Mobility Survey (JOLTS) report released on Tuesday showed that the number of job openings in July was 8.827 million, falling for the third consecutive month, indicating that labor market pressures have eased. The report also showed that 2.3% of non-farm payrolls quit in July, down from a high of 3% during the epidemic-induced "big quit". This indicator is the lowest since January 2021. Last month's hiring rate was the lowest since April 2020.

The data pointed to a fall in labor demand and a moderation in hiring, which the Federal Reserve believes is necessary to continue to reduce inflation and ease wage pressure. Policymakers hope this adjustment will not result in a sharp rise in unemployment.

After the release of the data, the market has cooled down the expectations of the Federal Reserve to raise interest rates during the year. According to the CME FedWatch tool, traders currently believe that the probability of the Federal Reserve keeping interest rates unchanged at the September meeting is 86%, higher than 78% before the data release; It is expected that the probability of the Federal Reserve raising interest rates in November will drop to 50%, lower than the 61.2% before the data. The US dollar and US bond yields have also weakened significantly as a result. The US dollar index fell 0.52% on Tuesday, the largest one-day decline since July 13. On Tuesday, the intraday low hit 103.36, a new low since last Thursday, and closed at 103.46. On Wednesday, the US dollar index rebounded slightly in the Asian market. It is currently trading near 103.58. Above the attention of the resistance near the 5-day moving average of 103.84

From a technical perspective, the short-term bearish signal of the US dollar index has strengthened, and the short-term may further test the support near the 21-day moving average of 103.14, and the 200-day moving average support is also near this position, which is expected to provide further opportunities for gold prices to rise.

Analysts at Action Economics noted that the data "bolster confidence that the Fed will not raise interest rates at its upcoming September 19-20 policy meeting and, in fact, may have ended".

However, Bipan Rai, head of North American FX strategy at CIBC Capital Markets in Toronto, pointed out that the market may be pricing in too many Fed rate cuts in 2024 relative to other central banks, and traders' repricing of this probability could further boost the dollar. "This tells me that there is still some room for the dollar to rise, at least in the short term."

In terms of U.S. bond yields, the yield on two-year Treasury bonds, which reflects interest rate expectations, fell 4% on Tuesday, the largest one-day decline in nearly a month and a half, to 4.886%. The lowest intraday low hit a three-week low of 4.871%, which should have hit an eight-week high on Monday. The 10-year U.S. Treasury yield fell 2.3% on Tuesday to 4.122%, and the lowest intraday low hit 4.107%, the lowest since August 11. At present, the technical side of U.S. bond yields is short-term biased towards bears and bullish gold futures.

"According to JOLTS, all indicators are pointing to an overall decline in the labour market, both in terms of the number of people quitting and job openings," said Will Compernolle, macro strategist at FHN Financial in New York. "JOLTS is also forward-looking. When the quitting rate falls, it means less pressure on wages going forward."

Ben Jeffery, a U.S. interest rate strategist at BMO Capital Markets in New York, said the data undoubtedly reduced the likelihood of interest rate hikes in September and November.

"It may be too early to draw very definitive conclusions," he said, referring to a speech by Fed chairperson Jerome Powell in Jackson Hole, Wyoming, last week. "The message we took from Mr. Powell's speech on Friday is that data-dependent remains the overarching theme."

Kitco senior market analyst Jim Wyckoff said the lackluster job openings and consumer confidence reports suggest the Federal Reserve may not raise interest rates as previously expected, which has helped gold and some short covering.

Data show that the world's largest gold-backed listed exchange-traded fund (ETF) - SPDR Gold Trust rose 0.3% (or 2.59 tons) to 889.23 tons on Tuesday, which is two consecutive trading days of increased holdings, the first time since May 22, reflecting the change in market sentiment; last week, the position repeatedly refreshed the low since January 2020.

Investors are now waiting for Thursday's release of the US Personal Consumption Expenditure (PCE) price index and Friday's non-farm payrolls data for further clues on the trajectory of interest rates. This trading day will usher in the US ADP employment data for August, commonly known as "small non-farm". The market expects ADP employment to increase by 195,000 in August, down from 324,000 in July, which is slightly biased towards bullish gold prices.

In addition, this trading day will also release the US second quarter GDP revision value and the second quarter PCE revision value.FXTForeign exchange reminds investors that they need to pay attention as well.

From a technical standpoint, the MACD and KDJ gold forks are running, and the gold price has broken through the 55-day moving average, and the short-term is biased towards bulls. The market outlook is expected to further test the resistance near the 1940 mark and the previous decline of 61.8% retracement level of 1948.06, and even the resistance near the 100-day moving average of 1957.02. Further strong resistance refers to the position near 1969.93 on the upper rail of the Bollinger Line; the lower 55-day moving average of 1931.59 has been converted into a preliminary support, and the 5-day moving average is currently near 1924.77. If it unexpectedly falls below this position, it will weaken the short-term bullish signal.

At 10:18 Beijing time, spot gold was quoted at $1936.43 per ounce.