The latest U.S. non-farm data has provided many insights for gold traders, and while they are still absorbing the full implications, it can be reasonably asserted that the reality is beginning to emerge.
With the dust settling on the U.S. non-farm data, gold traders now want to know where the prices will head and whether it makes sense to maintain a bias based on the data we've seen today.
Background: On Friday, gold traders were very optimistic, expecting a significant market reaction due to the importance of the U.S. non-farm data.
Given that these figures are the most important economic data in the world closely watched by the Federal Reserve, their assessment of the importance of these figures is correct.
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Before the data was released, traders were shooting in the dark rather than focusing on the actual situation.
Essentially, speculators have been focusing on key components of the U.S. non-farm data, such as the U.S. ADP data, U.S. JOLTS data, and U.S. ISM manufacturing data.
However, based on the results of these figures, their expectations for economic data have been somewhat unrealistic.
I'm not saying that the U.S. ADP, JOLTS, or even the revision of the U.S. employment data have not indicated a weak U.S. job market, but rather that the context and interpretation of these figures do not align with reality.
For example, with the U.S. labor market being very hot, the U.S. unemployment rate fell in the previous three months and then jumped to 4.3% last month, which is considered a weakness in the U.S. market.
Traders and investors began to view the situation differently, recognizing that the unemployment rate in the previous three periods was unlikely to continue.
In fact, any indicator below 4.5% actually represents full employment, or at least a robust economy with a stable job market.
So, did the Federal Reserve not make a policy mistake?
Before today's U.S. NFP data release, there was concern that the Federal Reserve had made another policy mistake, and the data would reveal further weakness, which would force the Federal Reserve to take more aggressive rate-cutting action.
But the actual figures aligned with the expected 4.2%, with the headline figure at 142,000, not far from expectations, a fact that confirms that there are no issues with the U.S. job market or even the Federal Reserve's policies.
Is a 25 basis point rate cut a done deal now?
It is not wrong to think that the Federal Reserve has no reason to adopt an aggressive monetary policy, and a 25 basis point rate cut is an appropriate course of action.
Speculators will have to adapt to reality, which means that the current rebound may have some room to run.
Where do we go from here?
From a technical price perspective, gold prices are well above this week's lows, and reality is gradually becoming clear.
This means that there will be some volatility in prices, but the likelihood of closing the week in the negative territory is small.
As September 18 approaches, the key level to watch is 2500.
Given the strong rise in gold prices this year, bears may try to push prices lower, but the overall trend is likely to remain positive as speculators adapt to reality.