Gold dips to 7-Month low as U.S. jobs market heats up

By Onome Amuge.

Gold futures hit seven-month lows on the last trading day of the week before rebounding to finish the day higher and the week lower after data showed that the U.S. economy created 336,000 jobs last month, significantly beating the market’s expectations.

The start of October was a difficult period for the precious metal, with the potential for the Federal Reserve to raise rates again and strong US jobs data driving up Treasury yields and the US dollar.

The most-active gold futures contract on New York’s Comex, the December contract, gained $13.40, or 0.7 per cent, at $1845.2 per ounce on Friday.

Last week’s selloff in bonds and rally in the US dollar drove both gold futures and the spot price lower on a weekly basis. December gold futures fell 3.1 per cent last week and another 1.1 per cent this week.

Spot gold was down by 4 per cent last week, its biggest weekly loss since June 2021, and was down almost 1 per cent this week. Analysts predicted that spot gold could reach a $1,750 support level, as central banks may start buying gold again at that level

Sunil Kumar Dixit, a technical analyst for gold at SKCharting.com, believes the bears will eventually push the spot price to $1,700 territory as global central banks are waiting to accumulate big chunks of gold at between the support levels of $1,760 to $1,750.

“The rampant US jobs growth for September didn’t immediately bring the new wave of selling expected in gold, but I think whatever rebound you’re seeing now won’t last,” Dixit added.

Meanwhile, the US Labour Department reported a surge in non-farm payrolls in September, with 336,000 new jobs added,the most since January. This exceeded the expectations of economists, who had forecast an average of 170,000 new jobs for the month.

In response to this news, the US Dollar Index which tracks the greenback against a basket of six major currencies,rose, reaching a high of 106.4. This is up from August’s lows but below the 11-month high of 107.35 reached earlier this week.

According to Michael Moor, founder of Moor Analytics, the gold market is testing critical downside exhaustion levels. This could lead to some investors exploring the market’s bullish potential.

Moor recommends a strategy of going long on two future contracts, selling one when the trade turns profitable, and letting the other contract run. He notes that this will either trigger a stop loss or confirm a rally, potentially indicating the end of the correction

“If that level holds and we see a rally, it could signal the start of a new long-term bullish structure,” he said. “I’m bearish on gold, all the technical, everything points lower, but these exhaustion levels are where traders should be testing the market,” he said.