#gold# US job additions for September has been strong – too strong in fact. The US non-farm payrolls crushed the range of analysts’ estimates by a wide margin to come in at its highest level in four months (254,000 versus 147,000 estimated). Past month’s data was also revised up by 17,000 to 159,000. The unemployment rate came in lower at 4.1% versus the 4.2% expected. Even wage growth accelerated to 0.4% month-on-month from the 0.3% prior.
The confluence of all the data points seem to suggest strength in labour conditions as the clear takeaway, probably even offering some surprises for markets with the current level of interest rates. The level of surprise was presented with a surge in US Treasury yields, as market rate expectations reprice to be more aligned with policymakers’ views. The US two-year yields soared 21 basis points (bp), US 10-year yields were up 12 bp, overall lifting the US dollar by 0.54% last Friday in its fifth consecutive session of gains.
Gold prices have been surprisingly resilient, hanging around its record high level despite a surge in Treasury yields and a stronger US dollar. Geopolitical risks in the Middle East may remain the overriding theme for now, supporting safe-haven flows for the yellow metal, which limit the downside reaction from a less-dovish market rate pricing. Prices hanging around resistance could be a sign of resilience, which may increase the odds of a break to fresh highs, especially as near-term technical conditions have now shifted towards more neutral levels. The daily relative strength index (RSI) has been trading above its key mid-line since July this year, which keeps an upward bias intact.
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Janelle
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