There is a saying in investigating a crime that says “follow the money”. Likewise, when examining where the price of gold will be headed in the near-term, it is wise to keep abreast of upcoming reports. Two key reports will shape the short-term direction and gold prices. The first report is tomorrow’s jobs report and the second report is the next CPI inflation report for September, due out on October 13th.
The forecast for tomorrow’s jobs report, according to FactSet, is expected to show an increase of 250,000 new jobs in September, which would be down from the 315,000 new jobs added in the previous month. Bloomberg’s forecasts are close and assume that another 260,000 new jobs were created in September. The Wall Street Journal expects Friday’s jobs report to show that another 275,000 new jobs were added last month. In other words, expectations for tomorrow’s report are pretty much aligned and consistent.
If these various forecasts are correct, this would be the month with the slowest job growth since December 2020. However, analysts and economists will focus on whether or not the labor market is showing signs of contraction as a positive sign. In other words, in the case of tomorrow’s report, good news would be bad news for US equities and gold. This is because slower growth in terms of job creation would help the Federal Reserve ease the pace of rate hikes in its fight to bring down the 40-year high and inflation.
This week’s ADP private sector jobs report showed that 208,000 additional jobs were added last month. These figures were above expectations and forecasts. If tomorrow’s jobs report comes in above estimates, it would reinforce the Federal Reserve’s resolve to continue raising interest rates at an extremely fast pace.
But the most important report the Federal Reserve will use in its monetary policy decision-making process is next week’s CPI inflation report for September. It will provide clear and indisputable evidence as to whether the Federal Reserve’s recent actions have begun to ease inflationary pressures. Currently, the CPI inflation index is at 8.3%, down 0.2% from last month’s 8.5%. However, the latest data on the Federal Reserve’s favorite inflation index, the PCE, showed that inflation rose slightly from the previous month.
According to the CME’s FedWatch tool, there is a 68.7% chance that the Federal Reserve will hike rates by 75 basis points for the fourth consecutive month. This would take the policy rate, which currently stands at 300-325 basis points, to 375-400 basis points on Nov. 3, the last day of the November FOMC meeting.
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As always, I wish you good business and good health,
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