On Friday, XAU/USD rose to $4,227, but failed to hold above $4,200. After that, gold rolled back to $4,138, which corresponds to a decline of about 1% for the day. The situation turned out to be unusual: the US labor market report came out significantly weaker than forecast, but gold still went down.
What the labor market report showed
Nonfarm payrolls, NFP, for September grew by only 29 thousand jobs. The forecast was +90 thousand. The August figure was revised to +133 thousand. The unemployment rate rose from 4.1% to 4.2%. The report turned out noticeably weaker than expectations, and usually such a set of data supports gold through lower rate expectations.
Why gold still fell
The main factor was US government bond yields. The yield on 10-year US Treasuries rose by about 4 basis points. The higher bond yields are, the less attractive gold becomes, since it itself does not generate interest income. Therefore, even a weak NFP could not keep the metal above $4,200.
The dollar was not the main factor
The DXY index, which shows the dollar's exchange rate against a basket of major currencies, on the contrary declined by about 0.14%, to 101.89. This means that the pressure on gold came not so much through a strong dollar as through rising rates in the debt market.
What the Fed says
John Williams of the New York Fed and Philip Jefferson of the Fed's Board of Governors signaled that the regulator is in no hurry with another rate change. The market estimates the probability of keeping the rate unchanged in October at about 77%. The next Fed meeting will take place on October 28.
What's next
Next week the market will watch several important events:
- the ISM services sector business activity index;
- the Fed meeting minutes;
- a speech by Michelle Bowman;
- the University of Michigan consumer sentiment index.
According to the technical picture, the nearest support for gold is around $4,100. Below that remain the July lows of $3,996 and $3,959. Above, the nearest resistance runs around $4,279, where the 100-day moving average is located.
Did you catch this pullback from $4,200?
During the day, gold moved almost $90: from $4,227 to $4,138. On a small deposit, such a move can give a limited result even with a good entry. Prop trading closes exactly this gap: first the trader passes a paid evaluation, after which they gain access to the company's capital. It is better to understand the mechanics before the next strong move, not after it.