Gold trading alert: U.S. manufacturing contracted gold prices four consecutive positive, wary of employment data to suppress

By    6 Jan,2023

Spot gold has oscillated narrowly and is currently trading near $1855/oz, holding most of its overnight gains. Concerns about the global recession and expectations that the Federal Reserve will slow some of its interest rate hikes have continued to support gold prices this week, with data on Wednesday showing the worst performance of the U.S. ISM manufacturing PMI since May 2020 and U.S. bond yields extending their decline, helping gold prices rise for the fourth consecutive session, although job openings data show the U.S. job market remains very strong and gold bulls need to be wary.


We are looking at the possibility that inflation may have peaked, and if we see economic data confirming that ......," said Bart Melek, head of commodity market strategy at TD Securities That would keep gold on the upside and possibly close to $1,865."

This trading day will usher in the "small non-farm payrolls" ADP employment data and U.S. initial jobless claims change, the market is expected to be more optimistic, biased to support the dollar and U.S. bond yields, may trigger a short-term pullback in gold prices, investors need to pay attention to the evening data on Friday's release of non-farm payrolls data expectations change.

Fundamentals are mainly favorable

Fed minutes: Fed wants to maintain "flexibility" in interest rate policy]

All policymakers at the Fed's Dec. 13-14 policy meeting agreed that the Fed should slow the pace of aggressive rate hikes, allowing them to continue to raise the cost of credit to control inflation, but to act in a gradual manner to limit the risks to economic growth.

The minutes of the meeting released Wednesday showed that policymakers remain focused on controlling the pace of price increases, which may be faster than expected, and are concerned about any "misperception" in financial markets that their commitment to fighting inflation is weakening.

But policymakers also acknowledged that they have made "significant progress" in raising interest rates to reduce inflation over the past year. As a result, the Fed now needs to strike a balance between anti-inflation and the associated risks, including an excessive economic slowdown, as well as a higher-than-necessary unemployment rate, which "could place the greatest burden on the most vulnerable groups. 

The record shows that "most policymakers at the meeting stressed the need to remain flexible and selective in shifting policy to a more restrictive stance," suggesting that policymakers may be prepared to trim rate increases to 25 basis points at the Jan. 31-Feb. 1 meeting, but also to The "terminal" rate is open to being higher than expected.

Indeed, the minutes focused on explaining that investors or the public should not interpret the decision to slow the pace of rate hikes as a sign that the Fed's commitment to pushing inflation back to its 2% target is waning.

"Participating policymakers reaffirmed their strong commitment to driving inflation back to the (Federal Open Market) Committee's 2 percent target," the minutes said, adding that "some participating policymakers emphasized that it was important to clearly convey the message that slowing the pace of rate increases did not indicate that the Committee's commitment to achieving its price stability objective in any way."

Policymakers announced a 50 basis point rate hike at the December meeting, a slower pace than the 75 basis points seen for most of 2022.

The minutes show that "no policymakers present thought it would be appropriate to begin lowering the target range for the federal funds rate in 2023."