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- Fed chair Powell’s testimony to lawmakers will be closely analyzed.
- The latest US Jobs Report will steer the US dollar at the end of the week,
- US Treasury yields nudge lower, helping to prop up gold.
Federal Reserve chairman Jerome Powell will be up before the US Senate on Tuesday and Wednesday this week, and market participants will be closely following his testimony for further clues about how the central bank thinks the fight against inflation is going. The current market thinking, and pricing, is that interest rates are going to hit 525-550 bps by the end of Q2, up three-quarters of a percentage point from the current target rate of 450-475bps. Any deviation from this expected path of rate hikes will add volatility to the US dollar.
The end of the week sees the release of the latest US Jobs Report (NFPs), a high-importance market event. Last month’s report saw a sizeable increase in jobs created, 517k compared to forecasts of 185k and a prior month’s 260k, bringing the US unemployment rate down to 3.4%, the lowest level since May 1969. Annual revisions to the survey data are seen behind last month’s sharp move so this week’s report will be closely watched to see if the data reverts back to trend. Current market expectations are for 200k new jobs and an unchanged unemployment rate.
The recent move higher in US Treasury yields has halted in the last few days, allowing gold to move higher. The interest-rate sensitive UST 2-year is now trading with a yield of 4.83%, down from a near 16-year high of 4.95% made last week. One technical signal, a gravestone doji on the daily chart, suggests that short-dated US Treasury yields may fall further.
GOLD PRICE DAILY CHART – MARCH 6, 2023
Gold is currently trading on either side of $1,850/oz, in the middle of two Fibonacci retracement levels at $1,828/oz. (38.2%) and $1,878/oz. (23.6%). As discussed earlier, lower US Treasury yields have given gold the room to press higher over the last week and the future path of US rates will decide gold’s next move.
GoldBULLISH
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| CHANGE IN | LONGS | SHORTS | OI |
| DAILY | 8% | 9% | 8% |
| WEEKLY | 0% | 16% | 4% |