Gold recovers despite strong NFP data

Despite solid labour demand, gold prices have sharply recovered, raising anticipation for another Fed interest rate hike. Despite a weak US Services PMI survey and a weak ADP Employment report this week, the price of the precious metal remained under pressure. At the time of writing, the precious metal is up 0.71% to $1832.70 per ounce.

The price of gold recovers in a V-shape. Despite the fact that the September Nonfarm Payrolls (NFP) report for the United States indicated that more job seekers were hired than anticipated. Investors predicted that US firms would hire 170K workers and generate 187K new positions in August, while actual fresh payrolls came in at 336K.

The Automatic Data Processing (ADP) employment figures were weak, which increased expectations of a drop in labour demand. The unemployment rate held unchanged at 3.8%, which was a tad higher than the 3.7% forecast.

The weekly jobless claims for the week ending September 29 remained broadly unchanged. Individuals claiming jobless benefits for the first time increased marginally to 207K from the former reading of 205K but lower than expectations of 210K.

The US Treasuries faced an intense sell-off this week due to the collaboration of expectations that interest rates will remain high amid a resilient US economy and concerns over rising fiscal deficits. San Francisco Fed Bank President Mary Daly said that another rate hike may not be needed if the labor market slows, inflation remains around 4%, and financial conditions remain tight.

Gold price delivers V-shape recovery despite the NFP report for September reporting that the number of job-seekers hired were significantly higher than expectations. Resilient labor market conditions have set a hawkish undertone for the Federal Reserve’s upcoming monetary policy decision in November.

ADP reported that the US private sector added 89K jobs in September, half the number it reported in August. Job growth in the leisure and hospitality sectors remained robust, while layoffs were witnessed in the manufacturing and transportation sectors.

The US Services PMI for September remained in line with estimates at 53.6, but the New Orders component came in significantly lower at 51.8 against the former release of 57.5. A poor demand outlook could weaken the appeal for the US Dollar. The US Dollar Index (DXY) has corrected to near 106.30 from its 11-month high of 107.35, but the broader outlook will be shaped by the Nonfarm Payrolls data, which will be published at 12:30 GMT.