Today, all eyes are on the most important economic data, the US Non Farm. The dollar index has plunged since the Fed has changed its mind about the monetary policy. This bleeding in the dollar index has resulted in seven consecutive weeks of gain for the gold price.
The Fed pays close attention to the economic numbers, and from day one, their mantra has been dependent on this. It is in this essence that the US NFP number is really important.
As mentioned yesterday, the tone set by the US private payroll number (released on Wednesday) is negative and it is widely expected among traders that today’s number is going to provide some strong tail wind for the gold price. The word strong doesn’t mean a huge spike in the price, in fact, it means that the gold price may continue to stay above the critical level of 1400.
Market is expecting the headline number to come in at 162K, any number above 150K should send a positive message to the market. This could hurt the gold price a little but nothing major. This is because, the US NFP is just one of the reason that the Fed is determined to change the path of their monetary policy. External factors such as the on going trade war and the unrest in the Middle East are other powerful forces which are impacting the gold price. Th upward move in the gold is primarily due to this as everything is interconnected.
Remember Trump is also pushing for the dovish monetary policy for a while and he has set things in motion by electing the people in the federal Reserve who will help to shape that. So, I think the long term trend for the gold is skewed to the upside and any short term retracements in the price could provide an opportunity to join the trend.
Oil prices are down again today, the WTI price has fallen by 1.13% and Brent prices are down by 0.11%. The main reason that we have not seen any surge in the oil prices is mainly due to protectionism policies architect by President Trump. Protectionism has been the biggest denominator, in fact, this particular factor has been more dominant than the supply. This is the reason that why we have not seen any serious surge in the price despite the fact oil tankers are being attacked in the Middle East.
Any positive number out of the US, especially the US NFP number will strengthen the argument that the global growth isn’t falling off the cliff.