There is a proverb when investigating a crime, “Follow the money”. Likewise, it is useful to follow the future reports while researching where gold prices will go in the short term. Two important reports will shape the short-term direction and price of gold. The first report is tomorrow’s employment report, and the second report is the next September CPI inflation report, which will be released on October 13.
According to FactSet, the forecast for tomorrow’s jobs report is expected to show an increase of 250,000 jobs added in September, less than 315,000 new jobs added in the previous month. Bloomberg’s estimates are close, estimating an additional 260,000 new jobs were added in September. The Wall Street Journal expects Friday’s jobs report to show 275,000 new jobs added last month. In other words, expectations for tomorrow’s report are quite harmonious and harmonious.
If these various forecasts are correct, December will represent the slowest month of job growth since 2020. But analysts and economists will focus on whether the labor market is showing signs of contraction as a positive indicator. In other words, in the case of tomorrow’s report, good news for US stocks and gold is bad news. That’s because slower growth in terms of added jobs will help the Federal Reserve loosen the rate of interest rate hikes in its fight to keep inflation down and its 40-year high.
This week’s ADP private sector employment report showed 208,000 additional jobs were added last month. These figures came above expectations and forecasts. If tomorrow’s jobs report beats forecasts, it will solidify the Federal Reserve’s determination to continue raising rates at such a rapid rate.
However, the most important report that the Central Bank will use in its monetary policy decision processes will be the CPI inflation report for September next week. It will provide conclusive and undeniable evidence of whether the Federal Reserve’s recent actions are beginning to reduce inflationary pressures. Currently, the CPI inflation index is at 8.3%, down 0.2% from 8.5% the previous month. However, the latest data on the Central Bank’s PCE preferred inflation index showed that inflation increased slightly compared to the previous month.
According to CME’s FedWatch tool, the probability that the Federal Reserve will raise rates by 75 basis points for the fourth consecutive year is 68.7%. This would take the fed funds rate from currently 300 to 325 basis points to 375 to 400 basis points on November 3, the last day of the November FOMC meeting.
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