Gold Price Analysis: XAU/USD Remains Calm Ahead of ADP Data Storm

• Gold price hovers around $1,935 as investors focus on ADP US jobs data.
• US companies receive fewer job applications as resignations fall.
• Investors hope the Fed will not raise interest rates any further this year.

The price of Gold (XAU/USD) is trading without direction after a strong recovery, as investors await the US ADP employment data to open new positions. The precious metal took advantage of softer JOLTS job offers data, which raised hopes that the Federal Reserve (Fed) will make a decision to leave interest rates unchanged at the September policy meeting. Lower employee confidence in the labor market reassured Fed officials to keep current interest rates at 5.25-5.50%.

Investors will be closely watching the private sector jobs data for August as Fed Chairman Jerome Powell promised at the Jackson Hole Symposium that further policy action will depend on the data. The US ADP employment change has been above consensus for the past four months. Weak labor demand in US private payrolls could allow Fed policymakers to discuss rate cuts sooner rather than later.

Market Drivers: Gold Price Swings Awaiting Private Sector Employment Data

• The price of gold consolidates in a tight range above $1,930 as investors await private sector payroll data for August, which will provide more details on the current situation in the labor market.
• The precious metal fights for a decisive move ahead of the ADP jobs change data as it will set a tone for the Federal Reserve’s September monetary policy.
• Investors project new private sector payrolls for August at 195,000, significantly below the July reading of 324,000. The last four reports have shown numbers significantly above the market consensus.
• The August labor market data is of significant importance, as Fed Chairman Jerome Powell conveyed at the Jackson Hole Symposium that inflation has become more sensitive to the labor market.
• On Tuesday, the US Bureau of Labor Statistics reported that the demand for labor softened in July. Employers offered 8.82 million vacancies, compared to 9.16 million vacancies in June.
• Meanwhile, the number of resignations was the lowest since early 2021. This indicates that either US companies are working to retain talent, or the workforce has lost confidence.
• The weakening of key US jobs data indicates that the labor market is losing its resilience and raises hopes of a soft landing from the Fed.
• Weaker-than-expected job opening data raised hopes of a firm Fed rate decision at the September Federal Open Market Committee (FOMC) meeting. According to CME’s FedWatch tool, there is an 86% chance that interest rates will remain at 5.25-5.50%. In addition, the chances that the interest rate policy will not be changed at the November meeting exceed 50%.
• If US hiring momentum slows further, the synergistic effect of job shortages and hiring easing will make Fed policymakers comfortable holding monetary policy no change this year.
• In addition to the US job openings data, US Conference Board-reported consumer confidence fell sharply to 106.1 as fears of persistent inflation renewed.
• Investors expect inflation above the desired rate to be a tough nut to crack. Additionally, consumer 12-month inflation expectations rose to 5.8% from 5.7% last month.
• Last week, Cleveland Fed President Loretta Mester supported one more interest rate hike in 2023 to ensure that the price stability target is achieved by 2026.
• In this data-packed week, investors will turn their attention to the August Non-Farm Payrolls (NFP) data, which will provide an in-depth look at labor market conditions.
• Aside from the US NFP, ISM manufacturing PMI data will also be on investors’ radar. Market participants expect factory activities to remain below the 50 threshold for the ninth consecutive month.
• The DXY Dollar Index gradually recovers after an intense sell-off that led it to settle near 103.40 points. However, the downside bias remains strong as the Fed is expected to halt its monetary policy tightening sooner.
• Meanwhile, 10-year US Treasury yields fell to around 4.15%, indicating higher expectations for a soft landing from the Fed.

Technical Analysis: Gold price remains in the woods above $1,930

Gold price moves up and down in a tight range above $1,930, following a rally inspired by disappointing JOLTS job openings data. After a stellar rally, the precious metal reaches near the top of the rising channel chart pattern formed on a small time frame. The yellow metal extends its rally above the 20 and 50 day EMAs, indicating that the medium-term trend has turned bullish.