Drop in Gold Prices
Gold prices witnessed a decline during Monday’s trading as investors took profits
after gold reached its highest level in over a month in the previous session.
This price increase was driven by growing expectations of a U.S. interest rate cut in September.
Topic
Gold
Economic data showed that the unemployment rate in the United States reached its highest level in two
and a half years at 4.1%, indicating a weak U.S. labor market.
The U.S. economy added 206,000 new jobs in June, following an addition of 218,000 jobs in May,
close to the expectation of 200,000 jobs.
Profit-taking today followed a significant rise in gold prices last Friday after labor market data.
Markets now see a 78% chance of a rate cut by the Federal Reserve in September,
with traders also anticipating a potential second rate cut in December.
The market’s focus this week is on the Federal Reserve Chairman’s testimony
before Congress and comments from central bank officials,
in addition to U.S. inflation data, which analysts consider as ideal catalysts for gold prices.
Jobs
Last Friday’s jobs report:
The lower-than-expected reading of the previous jobs report showed a significant slowdown in the labor market.
U.S. non-farm payroll data was generally weaker than expected.
The report was weak overall compared to expectations, with downward revisions lowering the average employment pace over three months to 177,000 from the previous data of 249,000.
Industrial sector jobs were weak, with government and healthcare sector jobs accounting for three-quarters of job gains in June, while many cyclical industries lost jobs.
The household survey was also weak, with the unemployment rate rising by 0.1 percentage points to 4.1%
as the labor force increase of 277,000 offset the household employment increase of 116,000.
Inflation
Inflation Report:
Investors will focus on the upcoming inflation report, which is considered the main event for the next week.
Last week, the U.S. labor market showed some signs of moderation,
with non-farm payroll numbers increasing by 206,000, slightly down from May.
The unemployment rate rose slightly from 4% to 4.1%, exceeding the Federal Reserve’s forecast of 4%.
Inflationary pressures also showed some signs of easing,
with the Institute for Supply Management’s prices paid index posting lower-than-expected numbers,
aligning with the lowest rates since the end of the pandemic.
Drop in Gold Prices