Gold Fundamental Outlook: Neutral
- Gold[1] sank after upbeat NFP[2] report increased Fed rate hike bets
- XAU/USD[3]’s next catalyst may come from US inflation figures
Gold prices fell sharply against a stronger US Dollar[4] on Friday. The July non-farm payrolls report crossed the wires at 943k, beating the consensus estimate of 870k. It was the most robust month of growth for the US labor market since August 2020. The unemployment rate also beat estimates, with the closely watched figure shedding 5 basis points to 5.4%, against the consensus view of 5.7%. The better-than-expected figure boosted Fed rate hike bets. The chance for a 25 basis point rate hike increased from 19.6% to 21.9% for the July 2022 FOMC[5] meeting, according to the CME Group’s FedWatch tool.
Bond traders responded aggressively. The benchmark 10-year Treasury note’s yield climbed 5.95% on Friday, the largest 1-day percentage change since March. Yields rise as bond prices drop. The Dollar rose along with Treasury rates, which weighed heavily on gold prices. The broad-based DXY index, which tracks the US Dollar against a basket of peer currencies, rose over half a percentage point following the NFP numbers. A stronger US Dollar makes it more expensive for foreign investors to hold gold, detracting from the asset’s appeal.
Gold traders will keep their eyes keenly focused on Fed rate hike bets going forward. That said, the upcoming inflation figures out of the United States, via the consumer price index (CPI), will likely be the next high-impact event for rate bets. The Bureau of Labor Statistics (BLS) is slated to release the data for July on August 11.
The core figure – which strips out volatile food and energy prices – is expected
