Gold market analysis

"Gold Prices Expected to Adjust After Sharp Rise" 4/8 10:08 am Final Draft
Although I predicted last Friday that gold prices would end the decline that began on July 23rd on that day, the price did indeed rebound strongly, but its sudden break above the 20-day and 50-day SMAs to reach a high of $3,363.50 was unexpected. Clearly, the main reason was that the number of new non-farm jobs added in the US in July was less than expected. The overall non-farm payroll increased by only 74,000, less than the expected 106,000, and private sector jobs increased by only 83,000. However, what was even more surprising was that the number of new jobs added in June was revised sharply downward from an initial estimate of 147,000 to only 14,000; the number of new private sector jobs was also revised sharply downward from an initial estimate of 74,000 to only 3,000, while the unemployment rate rose by 0.1 percentage point as expected to 4.2%. 

The non-farm payroll data for July did not deteriorate across the board. 

Although the non-farm payroll figure was surprisingly poor, there were some reassuring sub-components in the employment report. For instance, the average hourly earnings of private sector workers rose from $36.32 to $36.44, and the average weekly hours worked increased from 34.2 to 34.3. In terms of job changes, manufacturing jobs continued to decline by 13,000 for the third consecutive month in July, but service sector jobs increased by 96,000, far exceeding the 16,000 in June and 82,000 in May. Among them, retail trade jobs increased by 15,700 in July after a decrease of 14,300 in June. 

Looking at the reasons for unemployment, the number of people who became unemployed and ended their temporary jobs increased by 112,000; those who quit their jobs decreased by 41,000; those re-entering the labor market increased by 35,000, and the number of new entrants rose significantly by 275,000. Regarding the duration of unemployment, the number of those unemployed for less than five weeks increased by 58,000; those unemployed for five to fourteen weeks decreased by 97,000, reflecting the rapid absorption of the labor force. The number of those unemployed for fifteen to twenty-six weeks increased by 104,000, and those unemployed for more than twenty-six weeks rose by 179,000. Long-term unemployed individuals are mostly those targeting specific job types or demanding higher salaries. Additionally, the population not counted in the labor market decreased by 101,000, while the number of those who have no intention of seeking employment decreased significantly by 212,000. 

Gold price rises close to the resistance level of $3,374. 

I believe that the sharp decline in non-farm payrolls to only 19,000 and 14,000 in May and June respectively is closely related to Trump's reciprocal tariff measures. However, with the US reaching agreements with several major trading partners and continuing negotiations after the August 1 deadline, it is not surprising that non-farm payrolls increased significantly in August. After a sharp rise last Friday, gold prices dropped sharply in the Asian market this morning to a low of $3,335. From the hourly chart, gold prices are constrained by the resistance of the extended upward trend line formed since June 28 at $3,363. Assuming that the current stage is the third wave, the lowest point could be a pullback to around but above $3,303.76. If it rebounds by 61.8% of the largest decline since July 23, gold prices could reach $3,373.8. I believe that gold prices will encounter significant resistance at this level. I expect $3,334 to be the first support level for the day, and in the short term, it is likely to fluctuate between $3,304 and $3,374. 

The above content is for reference only and does not constitute investment advice. 

MTF Special Analyst Zheng Guangfu