How Are Gold Prices Facing A Stormy Economic Agenda?

A Tale of Two Reports: NFP and ISM

The recent release of the Non-Farm Payroll (NFP) and Institute for Supply Management (ISM) Manufacturing PMI reports has sent mixed signals about the state of the US economy. While the NFP report painted a picture of a slowing labor market, the ISM data suggested persistent inflationary pressures.

Gold, often seen as a hedge against inflation and economic uncertainty, initially rallied in response to the weak NFP report. However, the stronger-than-expected inflation data tempered gold’s gains. As investors grapple with these conflicting signals, gold’s price is likely to remain volatile in the near term. As of writing, gold is -0.26% lower, trading at $ 2,736.54 per ounce, but speculations suggest either a collapse or a takeoff towards $ 3,000 in November.

It is crucial to monitor future economic data releases, including the upcoming ISM Non-Manufacturing PMI report, to gain a clearer picture of the US economic outlook. In the meantime, investors should adopt a cautious approach and consider diversifying their portfolios to mitigate risk.

The NFP report, which showed a meager 12,000 job additions in October, marked the weakest reading in nearly four years. This unexpected slowdown raised concerns about the health of the US economy and prompted speculation about potential interest rate cuts by the Federal Reserve.

However, the ISM Manufacturing PMI report offered a more cautious outlook. Despite a decline in overall manufacturing activity, the index remained above the 50-point threshold, indicating expansion. More importantly, the report highlighted persistent inflationary pressures, with the prices paid index hitting a multi-month high.

This divergence in economic indicators has created a perplexing situation for investors and policymakers alike. While the weak NFP report suggests that the Fed may have more room to ease monetary policy, the inflationary pressures highlighted by the ISM data could limit the central bank’s ability to cut rates aggressively.

Gold has reached a swing high after approaching the $2,800 target, and a pullback is overdue. Given the election outcome and next week’s Fed announcement, prices could go either way in November. If gold corrects, the initial drop could be sharp, followed by sideways trading. A 25% chance prices keep pressing towards $3,000.

Gold has confirmed a significant bull market breakout in 2024, leaving the $2,000 level in the rearview mirror. The long-term forecast anticipates gold could reach between $8,000 and $10,000 by 2030. Market dynamics are changing, and investors should take note of this. Over the last decade, gold has spent 80% of its time moving sideways and 20% in rallies. Moving forward, it is expected that this will shift to 80% of the time spent rallying and 20% trending sideways.

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Gold sentiment is still below the peaks seen over the past five years, which may cause prices to keep rising. Gold needs to hold support near $32.50 to maintain the potential for an accelerated rally towards $40.00. Platinum is testing support near $1,000, and progressive closes below the 50-day EMA would promote more downside.