Gold is on a downward drift as the markets await the latest US jobs figures that should provide more clarity on the health of the world’s largest economy.
The jolt to market confidence on the back of Fitch Ratings’ downgrade of its US credit rating so today’s jobs data will be crucial in stabilizing faith that the country remains on a steady course in the face of the Federal Reserve’s long campaign of interest rate hikes.
It is the prospect of that campaign coming close to its end that has kept gold supported in the last month or so. Therefore any indication from today’s numbers that the Fed may need another hike still is likely to send gold crashing down towards $1,900 an ounce.
However, assuming the jobs data shows another 200,000 people being added to the US payroll in July then traders are likely to keep their interest rate curve expectations where they are, with the final hike possibly already having been implemented. While this state has been beneficial for gold in the short-term, the medium-term reality of the US economy holding up remarkably well in the face of all the challenges thrown at it in 2023 is negative for the precious metal as traders will tentatively move money towards riskier assets and away from the haven that gold offers.
As such, gold looks set for a continuation of the downward drift to $1,900 an ounce, a level at which the metal’s reaction will be crucial in determining the strength of its underlying support.
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