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Big non-farm data is coming, are you ready?

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The monthly nonfarm payroll data is coming soon. Do you know how it will affect gold prices?

The "nonfarm" data is released by the US Department of Labor on the first Friday of each month. It consists of three values: nonfarm employment, employment rate, and unemployment rate, which reflect the development and growth of the manufacturing and service industries. A decrease in these numbers represents a reduction in production by businesses and an economic downturn. Therefore, the following basic rules apply to the price trends of gold:

1. A decrease in nonfarm values indicates an economic downturn, a reduction in production by businesses, and a weakening of the US dollar, which is favorable for gold.
2. An increase in nonfarm values indicates a healthy economic condition, which is favorable for increasing interest rates, strengthening the US dollar, and unfavorable for gold.

In general, if the overall economic data in the United States is weak and the ADP employment data is favorable for spot gold before the nonfarm data is released, the market may start to show a bullish trend for gold prices on Thursday and Friday. On the other hand, if there are signs of economic recovery in the United States before the release of the nonfarm data and the economy is strong, it will be bearish for gold prices, and investors can take advantage of short positions.

Therefore, if the newly added nonfarm data exceeds the market's expectations, the Federal Reserve's expectation of raising interest rates may rise again. However, the uncertain global economic recovery has led to continued expectations of monetary easing by central banks, and the combined effects of these factors have led to extreme fluctuations in gold prices during nonfarm data releases. As a gold investor, you can actively pay attention to the nonfarm market, but there is no need to demand excessive profits from the market. Instead, it is essential to understand the impact of this data on gold price movements.

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Nota

Unemployment Rate
A decrease in the unemployment rate represents overall healthy economic development, which is positive for the US dollar and negative for the price of gold.

An increase in the unemployment rate represents a slowdown or recession in economic development, which is negative for the US dollar and positive for the price of gold.

(In theory, the impact of the unemployment rate on gold prices is opposite to that of non-farm employment data, but in practice, non-farm employment data is the primary indicator.)

The above is only a general operating principle, and the market situation is constantly changing. Sometimes, when the data is generally in line with expectations, its impact on the market may be limited. Other times, unexpectedly good or bad data may contradict the above analytical approach. For example, non-farm employment data that greatly exceeds expectations may reduce the safe-haven demand for the US dollar, causing the US dollar index to fall. Conversely, unexpectedly weak non-farm employment data may trigger safe-haven sentiment and market concerns, causing the US dollar to rebound.

Nota

The Relationship between Non-farm Payrolls and Gold Price

Firstly, the relationship between non-farm payrolls and gold price does not always follow the general logic of "higher-than-expected non-farm employment leads to a rebound in the US dollar and a decline in gold price, and vice versa". Special circumstances still exist. Sometimes, despite better-than-expected non-farm data, risk appetite may cause the US dollar to fall instead of rise, leading to a rise in gold price instead of a decline. On the other hand, sometimes, when data is particularly poor, the US dollar may rise instead of falling due to the boost in safe-haven sentiment, causing gold price to decline instead of rise. The key factor here is the investors' risk appetite.

Nota

Secondly, there are multiple factors that affect the volatility of gold prices, which evolve simultaneously. After the release of nonfarm payroll data, it may not necessarily play a dominant role in the trend of gold prices. Even if the data is "strong," its impact on the US dollar and gold is likely to be a dynamic process, and it may even evolve like a roller coaster.

Nota

In addition: Although the non-agricultural data has a significant impact on the gold price trend, the time is short. Generally speaking, it is more intense within half an hour after the data is released, but it will last until next Monday at most.

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Nota

There will be several important data releases this week that will impact the gold market, so it is important to keep an eye on them.

Wednesday: US February ADP Employment Report - Four-star importance
Bank of Canada Interest Rate Decision until March 8 - Four-star importance
Thursday: US Initial Jobless Claims for the week ending March 4 - Four-star importance
Friday: US February Non-Farm Payrolls (Seasonally Adjusted) - Five-star importance
US February Unemployment Rate - Five-star importance

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Nota

Two four-star data will be released today, the US ADP employment report for February and the Bank of Canada interest rate decision until March 8. pay attention stay tuned

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Nota

The upcoming non-farm payroll (NFP) data release will have a significant impact on the market, particularly on the price of gold. During his monetary policy testimony to the Senate on Tuesday, Powell emphasized the need to accelerate interest rate hikes, which resulted in a sharp decline in the price of gold due to the uncertainty surrounding the comment. Powell reiterated his stance on Wednesday, stating that he would focus on economic data and use it as a reference for making decisions on monetary policy.

Clearly, the forthcoming NFP data for February in the US is an important factor for decision-making. The current swing position of gold at 1835 points is likely to move in one direction after the data is released.

Therefore, it is crucial to stay informed about the release of the NFP data.

I will update my analysis on gold later, so please stay tuned.

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