Gold and U.S. dollar rose together, focusing on one important data and two key deadlines in October

On Friday (September 24), spot gold rebounded, partially regaining the over 1.4% drop recorded overnight, but the US dollar index rose again and stood above the 93 mark. The market believes that before the release of the US employment data in September, there is little room for the price of gold to fall. The US Congress faces two key deadlines, which may worsen risk sentiment.


GMT+8 20:10, spot gold price rose by 0.45% to 1750.44 US dollars per ounce; the main COMEX gold contract rose by 0.03% to 1750.4 US dollars per ounce; the dollar index rose 0.21% to 93.302.


After concluding the policy meeting this week, the Fed stated that it intends to cut its monthly debt purchases of 120 billion U.S. dollars as early as November. If there is no major change in the direction of the US economic recovery, it will certainly begin before the end of this year. The Fed also hinted that it might raise interest rates next year, and 9 out of 18 policymakers expect that borrowing costs will need to rise next year. All these inject confidence into the dollar bulls.

But the Fed still leaves room for maneuver to slow down its policy tightening if necessary. In its policy statement issued on Wednesday, the Federal Reserve acknowledged that the most troubled part of the economy has been hit by the new epidemic. Chairman Powell also emphasized this point at the press conference.

Peter Kinsella, head of foreign exchange strategy at UBP, an asset management company, said: "The Fed slightly raised its median forecast for 2023 (interest rates)... But the U.S. dollar has strengthened sharply and you need to see the (US Treasury yield curve) front end steeper."

U.S. employment performance in September may be unsatisfactory

The September non-agricultural employment report in the United States will be released on October 8. This data will show in detail the situation of job creation in September. This will also be the last official employment report received by the Federal Reserve before the November meeting. In the 10 years from 2010 to the beginning of 2020, the average monthly increase in employment was 186,000.

Powell said that the employment report does not need to be "amazing, great, or super, but at least it should be reasonable." However, the high-frequency employment data so far shows that the new crown epidemic may still hinder recruitment. The performance of the September non-agricultural employment report may disappoint the Fed.

JPMorgan Chase recently analyzed other higher frequency data and predicted that companies will add 330,000 jobs in September. The Oxford Economic Research Institute’s Economic Recovery Tracking Index fell in the week of September 10, and the index measuring employment fell by 2 percentage points.

Homebase’s employment data shows that based on a sample of about 50,000 small businesses, the number of employees has steadily declined, many of which are companies in restaurants and other service industries. If consumers again avoid face-to-face activities due to the new wave of COVID-19. Such companies are most likely to feel the impact.

Dave Gilbertson, vice president of workforce management company UKG, said that a report compiled by UKG this week showed that during the week of the federal employment survey, shift work in various industries actually increased from August to September. "We are very likely. Another month will pass, but we have not seen the acceleration of job creation predicted by economists."

Gilbertson pointed out that job vacancies are still strong, but people are still reluctant to jump back into the market, whether it is due to family and parenting obligations, wage and benefit requirements, changes in work paths, or a surge in Delta variant infections.

Since the outbreak of the new crown epidemic, the United States is still missing millions of jobs. If the United States cannot add more than 400,000 non-agricultural jobs in September, the recovery of the job market will meet the ideal premise of not tightening the Fed's monetary policy. Before the data is released, there is no significant downside for gold.

The U.S. Congress faces two important deadlines

Senate Majority Leader Schumer and House Speaker Pelosi said on Thursday that they have reached an agreement to provide financial support for President Biden’s $3.5 trillion social spending plan. At the same time, the U.S. Congress is also facing two critical and fast approaching deadlines.

But Schumer or Pelosi did not provide detailed information. President Biden's plan was not only boycotted by the Republican Party, but there are also obvious differences within the Democratic Party. Democratic moderates believe that the scale of spending is too large, while progressives say they will not accept any bills with smaller funding.

Ron Wyden, chairman of the Senate Finance Committee, said that the framework is designed to overcome differences between moderates and progressive Democrats, and their support is essential to enact Biden’s legislation without a Republican vote. If all Republicans vote against, the Democrats will have only three votes left in the House of Representatives and zero in the Senate.

If lawmakers do not take action, federal agency funds will run out on October 1, which will prompt a partial shutdown of the federal government. Earlier, the White House warned that federal agencies have begun to prepare for the possibility of a government shutdown. The U.S. Treasury Department also warned that unless Congress raises or temporarily cancels the national borrowing limit, it will run out of funds to pay government bills by mid-October, which may lead to a historic default.

The White House described its warnings to federal agencies as a form of preparation for a possible government shutdown. White House spokesperson Psaki said: "This is just a reminder that we still have seven days. Of course, we need to be prepared just in case."

The Senate plans to vote next week on a measure to suspend the $28.4 trillion debt ceiling and allow federal agencies to continue operations after the end of the fiscal year on September 30. But Senate Republican leader McConnell has vowed to stop it.

If an agreement cannot be reached, the consequences will be serious, including the interruption of welfare checks for veterans and Social Security pensioners. Historical violations of borrowing authority may affect the U.S. economy, increase consumer interest rates, and may force state governments to raise taxes to pay higher interest rates. The dollar cash circulating in the market will decrease, which in turn will increase the U.S. dollar exchange rate.

Spot gold short-term expected to rebound to 1760 US dollars

On the daily chart, the price of gold fell below the 38.2% target of the downward (3) wave that started from $1834 at $1744. The market outlook is expected to further drop to the 61.8% target at $1688. (3) Wave is a sub-wave of the downward ((Y)) wave that started from 1917 USD, and ((Y)) belongs to the corrective IV wave that started from 2075 USD.

On the hourly chart, the price of gold is expected to rebound from US$1,737 in 2 waves. Looking at US$1,760 in the short-term, it is the 23.6% Fibonacci retracement level of the 1 wave of downward movement that started from US$1834. Wave 1 is a sub-wave of (3) wave.