Gold moves towards $4,200 after weak U.S. jobs report

Risk Warning: The information in this article is provided for general informational and educational purposes only. It does not constitute investment advice, a personal recommendation, an offer, or a solicitation to buy or sell any security, financial instrument, or product. Investing in equities, indices, ETFs, commodities and other financial instruments involves a significant risk of loss and is not suitable for every investor. Past performance is not a reliable indicator of future results. Cryptocurrencies and digital assets are highly volatile, may be unregulated in some jurisdictions, and can lose value rapidly and without warning. Foreign exchange trading involves significant risk, including currency volatility and potential loss of capital.

Gold moved towards $4,200 after a weak U.S. jobs report that showed a slowdown in hiring in the month of June, as per a Bloomberg report. The report showed that 57,000 nonfarm payrolls were added in June, down from 129,000 jobs in the month of May. 

Traders pulled back their bets on Thursday on the possibility of a rate hike. The U.S. dollar slacked in value against the following currencies at the time of writing.

• USD/KRW: -0.54% 
• USD/CHF: -0.24% 
• USD/JPY: -0.16% 
• USD/CAD: -0.08% 
• USD/HKD: 0.00% 
• USD/GBP: -0.14% 
• USD/EUR: -0.18% 

With oil prices back to their pre-war levels, inflation risks have gone down considerably, the priority of reducing inflation may be moved down the list in favor of growth when considering the recent weak jobs report. 

A freer flow of oil through the Strait of Hormuz has helped to ease fears that the oil supply will be slowing any time soon. 

Lower interest rates are often linked to a more robust business environment, by which job creation has room to grow due to lower borrowing costs for companies. 

A new federal reserve Chair (Kevin Warsh) has created a new level of uncertainty as to what the new policy of rate management will look like. 

From the viewpoint of American equities, tech-heavy indexes and small-cap indexes such as the NASDAQ100 and the Russell2000 lost value while the premium blue-chip Dow Jones gained. Three of four major indices were down, with the NASDAQ taking the hardest hit. The Dow Jones was the sole gainer. (Source: TIKR terminal)

• S&P 500 (SPY): -0.13%
• NASDAQ (QQQ): -1.73%
• Dow Jones (DIA): +1.05%
• Russell 2000 (IWM): -0.58%

The same movement was reflected in sector-focused ETFs with tech, semiconductors, communication services, and consumer discretionary losing value. 

• Technology: -2.71%
• Health Care: +2.63%
• Real Estate: +1.13%
• Financials: +1.53%
• Utilities: +2.21%
• Communication Services: -0.13%
• Consumer Discretionary: -0.82%
• Consumer Staples: +2.03%
• Industrials: +0.30%
• Energy: +0.78%
• Materials: +1.94%
• Aerospace & Defense: +1.78%
• Biotechnology: +2.93%
• Medical Devices: +3.80%
• REITs: +1.19%
• Semiconductor: -5.57%
• Software: +0.25%

Summary

In the view of the SGFX research desk, as gold rebounds and the U.S. dollar recedes against its peer currencies, weakening inflation and slowing jobs growth suggests the agenda of the federal reserve could shift from one of hawkishness to doveishness, although this would depend on future volume through the Strait of Hormuz. 

Research references

• Stock Market Today: Dow, S&P Live Updates for July 3 - Bloomberg
• Gold Rises Toward $4,200 as Weak Jobs Data Lowers Rate-Hike Odds - Bloomberg
• Trump Financial Disclosure Details Thousands of Trades, Large Asset Swings - Bloomberg
• Bloomberg data
• TIKR terminal data

Disclaimer: This article reflects the views and analysis of the author at the time of publication and is based on information believed to be reliable from publicly available sources. Spectra Global makes no representation or warranty, express or implied, as to the accuracy, completeness, or timeliness of the information contained herein, and accepts no liability for any loss arising from reliance on it. Spectra Global is licensed by the UAE Securities and Commodities Authority (SCA) under Category 5 (Promotion). Nothing in this article should be construed as a personal recommendation or as an inducement to enter into any transaction. Past performance is not indicative of future results. SpectraGlobal has no commercial relationship with any company referenced in this article.