As per our view in this week’s previous Nugget commentary, the gold price has remained range-bound between $1,805 and $1,825 as markets await U.S employment data out this Friday.
The reason for this is that the U.S Fed stated last week that their policy changes would be dictated mostly by the employment data from the U.S economy – effectively they’re only going to take their foot off the money printing pedal if jobs are being filled at breakneck speed in America, or ‘maximum employment goals’ as per Fed speak.
This is noteworthy with regards to inflation, because Fed Chair Jerome Powell indicated that they’re not concerning themselves with inflation – an indicator that they remain dovish in terms of monetary policy. Economist Steve Hanke warned that this is exactly what the Fed should be worried about, and that U.S inflation should average 6% to 9% by end 2021 – substantially higher than the Fed target of c.2%.
Powell also indicated that they would maintain their interest rate target at current historic lows (0.25%), until employment figures improve substantially. With U.S Treasury interest rates being the most sensitive factor affecting the gold price, and the U.S 10 Year Treasury yield sitting below 1.3%, this bodes well for continued strength in the gold price.
Markets will await U.S jobs data (U.S Non-Farm Payrolls) to be released on Friday, and traders will be watching the key resistance level of $1,835/oz.
The yellow metal was last seen trading at $1,814/oz.