Gold trading reminder: non-agricultural is approaching! The U.S. dollar "falls off the chain", and the price of gold refers to the 100-day moving average?

In Asian time on Friday (June 3), spot gold rose slightly, hitting a new high of $1,873.99 per ounce since May 10, as the U.S. ADP employment data in May was worse than expected, recording its worst performance in more than two years , causing a sharp setback for the US dollar and providing upward momentum to the price of gold. In addition, the war between Russia and Ukraine continues. After several days of fierce fighting, the Russian army has controlled most of the eastern industrial city of Severo Donetsk. South advance, safe-haven buying has strengthened. From a technical point of view, the short-term bullish signal has increased, and the price of gold is expected to further test the resistance near the 100-day moving average at 1890.

However, the number of continuing jobless claims in the United States is the lowest since the end of 1969. Two Fed policymakers indicated that a rate hike in September is a certainty. The sharp rise in the US stock market may still cause trouble for gold prices.

This trading day will focus on the US May non-farm payrolls report and the US May ISM non-manufacturing PMI data, pay attention to news related to the geopolitical situation in Russia and Ukraine, news related to the new crown epidemic, and pay attention to the performance of global stock markets.

Fundamentals are mostly bullish

[ADP employment data is worse than expected]

The report showed that private payrolls increased by 128,000 jobs in May. It was the smallest increase since April 2020, when the U.S. economy was battered by the coronavirus lockdown, with a record 20.493 million job losses for the month. April was an increase of 202,000.

Economists had expected private payrolls to rise by 300,000 jobs in May. ADP's report, which was compiled in conjunction with Moody's Analytics, comes ahead of the Labor Department's more comprehensive and closely watched May nonfarm payrolls report on Friday. However, it has a poor record of forecasting private jobs in the BLS employment report due to differences in methodology.

Ryan McKay, commodity strategist at TD Securities, said, "The jobs data really added to the recession fears that have been brewing in the market and supported gold prices."

[The dollar fell nearly 0.8% on Thursday]
The dollar fell across the board on Thursday, paring gains in recent sessions, as stronger risk sentiment drove investors to higher-yielding currencies.

Global stocks rose on Thursday after recent weakness, as investors bet that Saudi Arabia could boost crude output, cooling oil prices, helping to balance concerns about soaring inflation and tightening monetary policy.

"There were a few factors that were negative for the dollar today, but mostly risk sentiment," said John Doyle, vice president of trading at Monex USA.

News that Saudi Arabia could produce more oil and reports that the Asian powerhouse will ease some of its coronavirus lockdowns helped boost risk sentiment and was a negative for the safe-haven dollar, Doyle said.

Shanghai returned to its former vibrancy on Wednesday, with shops reopening and people returning to offices, parks and malls.



The dollar index closed down 0.8 percent at 101.76 on Thursday, snapping a two-day winning streak.

U.S. private payrolls rose much less than expected in May, data showed, suggesting demand for labor is starting to slow amid rising interest rates and tighter financial conditions, but job vacancies remain extremely high.

Sagar Dua, an analyst at FXStreet, a well-known financial website, said that the weak US ADP employment data has weakened the attractiveness of the dollar. Investors should brace for extreme volatility in the U.S. dollar index following the downbeat ADP data, which will support gold prices.

Gold has broken past the 38.2% Fibonacci retracement level at $1,867.65 an ounce of the latest decline (April 18 high $1,998.43 an ounce May 16 low $1,786.94 an ounce), Dua said. Additionally, on the hourly chart, the 50-period exponential moving average (EMA) crossed above the 200-period EMA, forming a “golden cross,” adding to gold’s upside momentum. The Relative Strength Index (RSI) (14) has moved into a bullish range of 60.00-80.00, which suggests more gains ahead for gold.

Investors will be watching closely for signs of a slowdown in the labor market due to recession fears, noted Forex.Com.

Joe Manimbo, senior market analyst at Western Union Business Solutions, said the U.S. dollar is losing momentum as the view that the Fed will pause rate hikes in the fall gains more support; the euro has been the main beneficiary of the dollar's decline, but that momentum has stalled as well.

Manimbo noted that the key U.S. data this week will be Friday's May nonfarm payrolls data. The jobs data will suggest room for the Fed to tighten policy after the third quarter.

The U.S. dollar index fell sharply after failing to hold above the key resistance at 102.50, noted FXStreet analyst Sagar Dua. The dollar index has tumbled to around 101.70. Investors should be aware of the fact that a sharp drop in U.S. non-farm payrolls data would lead to a new monthly low for the dollar.

[The Russian army strengthens its control over Severo Donetsk, and the Ukrainian president looks forward to seeing the turning point of the war]

In the battle for control of the Donbas region in eastern Ukraine, Russia has tightened its grip on a key target in Severo Donetsk, while Ukrainian President Volodymyr Zelensky has pleaded with the West for more weapons to help Ukraine reach an "inflection point" "And won the war.

Zelensky told the Luxembourg parliament via video link on Thursday that Russian forces now occupy about one-fifth of Ukraine's territory and that the front stretches more than 1,000 kilometers (620 miles).

As the war approaches 100 days, Russia says Washington is "adding fuel to the fire" by providing Ukraine with $700 million in weapons, including an advanced rocket system with a range of up to 80 kilometers (50 miles). Zelensky said more arms supplies would ensure the confrontation reaches an inflection point in Ukraine's favor.

The U.S. government said it had assurances from Ukraine that it would not use the rocket system to hit targets inside Russia.

Asked if Kyiv had made such assurances, Ukraine's deputy defense minister, Hanna Malyar, told a briefing: "It has always been said in Ukraine that we are fighting a purely defensive war."

"The introduction of (Western) weapons into Ukraine does not change all the parameters of the special operation," Kremlin spokesman Dmitry Peskov told reporters.

"The objective of the operation will be achieved, but it will bring more pain to Ukraine," Peskov said when asked if the U.S. plan to sell Ukraine's missile-equipped drones would change the nature of the conflict.

The British Ministry of Defence said in its daily intelligence report that after days of heavy fighting, backed by heavy artillery, Russian troops took control of much of the eastern industrial city of Severo Donetsk, which is now largely a desert ruins.

In addition to the attack on the city, Russian troops are also attacking other areas in the east and northeast, the Ukrainian Armed Forces General Staff said.

Donetsk Governor Pavlo Kyrylenko said the Russians were also trying to push south, pushing towards the provincial cities of Kramatorsk and Slovyansk.

The war and the sanctions imposed by the West for it are taking their toll on the world economy. Russia has been blocking Ukrainian agricultural exports after taking control of some of Ukraine's largest seaports and a key Black Sea route, deepening a global food crisis.

In another sign of economic stress, Ukraine's central bank raised its benchmark interest rate to a seven-year high to combat soaring inflation and protect the currency, while the central bank's governor called for talks with the International Monetary Fund on a new financing plan.

As Washington blacklists more Kremlin-linked individuals and entities, the European Union has also finally approved a sanctions package that includes a 90 percent cut in imports of Russian oil by the end of the year. Moscow called the move "self-destructive", saying it could destabilize global energy markets.

The conflict has also prompted Finland and Sweden to seek membership in NATO, although NATO member Turkey has been blocking the move, accusing both countries of harboring people linked to Kurdish militants.

The fundamentals are mainly bearish

[Two Fed policymakers hinted that a rate hike in September is a certainty]

Two policymakers hinted on Thursday that the Federal Reserve is expected to raise interest rates by 50 basis points at each of its next two meetings, before it may continue to tighten monetary policy, the only question being how much.

"From the data we have right now, the market pricing in a possible 50 basis point rate hike in June and July ... seems like a reasonable path," said Fed Vice Chairman Brainard.

By September, she said, "if we don't see a pullback in the monthly inflation numbers, if we don't see some buoyant demand starting to cool off a little, then another move of this magnitude may be appropriate at the next meeting. "

But she hinted that even if price pressures start to subside, the Fed could still raise rates, just to a lesser extent. “It’s hard to see a reason to pause rate hikes right now,” she said. “We still have a lot of work to do to get inflation down to our 2 percent target.” U.S. inflation is currently at its highest level in 40 years.



The Fed has raised rates by 75 basis points this year, and most Fed policymakers support a 50 basis point hike at each of the next two meetings.

Atlanta Fed President Bostic previously suggested that the Fed should pause rate hikes in September to assess the state of the U.S. economy before deciding whether to tighten policy further.

Brainard's remarks indicated that this was not the view of the Fed's core leadership.

Interest rate futures traders are now pricing in a higher than 50% chance of the Fed's policy rate target range of 2.75% to 3% by the end of the year, a full 200 basis points above current levels.

In a speech to the Philadelphia Council of Business and Economics, Cleveland Fed President Mester called for volatile markets, slowing economic growth, and even volatile markets as the Fed raises interest rates to combat "unacceptably high" inflation. Remain "resilient" in the face of rising unemployment.

Mester said on Thursday that the Fed needs to raise interest rates to 2.5% soon, with further increases likely to follow.

If both June and July raise rates by 50 basis points, the Fed's policy rate target range will reach 1.75%-2%. Speaking of high inflation, she said, "I wouldn't declare victory too soon."

[The U.S. labor market remains strong, with the lowest number of continuing jobless claims since the end of 1969]

U.S. jobless claims unexpectedly fell last week and demand for labor remained strong, helping to support the economy amid rising interest rates and tightening financial conditions.

The Labor Department's weekly jobless claims report on Thursday also showed that the number of people filing for state unemployment benefits fell to the lowest level since 1969 in the second half of May. The report is the most timely data on the physical health of the economy.

The Federal Reserve's aggressive monetary policy stance to combat high inflation has fueled recession fears. Other data on Thursday showed private-sector payrolls rose at the slowest pace in two years in May, but that was also partly due to a labor shortage. The Fed is trying to cool labor demand without causing unemployment to climb.

“Job growth is slowing across the country, but few workers are actually losing their jobs,” said Christopher Rupkey, chief economist at FWDBONDS. The tightness has not eased as Fed officials had hoped."

Initial jobless claims fell by 11,000 to a seasonally adjusted 200,000 for the week ended May 28. Economists polled by Reuters had forecast 210,000.

A second straight weekly decline in claims offset the recent gains after hitting the highest level since January.

Continuing claims for unemployment benefits fell by 34,000 to 1.309 million in the week ended May 21, the lowest level since December 1969.

Economists said initial jobless claims would need to exceed 300,000 to cool a hot job market.

Underscoring the strength of the labor market, the number of layoffs announced by U.S. businesses fell 14.7% to 20,712 in May, according to a second report from global reemployment firm Challenger, Gray & Christmas on Thursday.

Employers have announced 100,694 job cuts so far this year, the lowest total for January-May since Challenger began tracking monthly layoffs in 1993, and a 48% drop from the same period in 2021.

That made the ADP national employment report released on the same day less attention.

[U.S. stocks closed sharply higher on Thursday, led by growth giants such as Tesla and Nvidia]
U.S. stocks ended sharply higher on Thursday, led by Tesla, Nvidia and other growth giants ahead of a key jobs report on Friday.

Tesla, Nvidia and Meta Platform all rose more than 4%, pushing the S&P 500 and Nasdaq higher. Amazon rose 3.1 percent and Apple climbed 1.7 percent.

Of the 11 sectors in the S&P 500, 10 rose, led by consumer discretionary stocks, which rose 3.03%, and materials stocks rose 2.69%.

Earlier in the session, U.S. stocks fell briefly after Fed Vice Chairman Brainard said she supported at least two more 50-basis-point rate hikes and would continue to raise rates by that amount if price pressures fail to cool. She also said a pause in rate hikes in September was unlikely. [nL4S2XP2R6]

U.S. stocks have rallied slightly in recent sessions as investors debate whether the worst of the sell-off that has dominated Wall Street so far this year is over.

"Volatility has become the norm, not the exception," warned Terry Sandven, chief equity strategist at USBank Wealth Management. "The stock market is being capped by inflation, and until inflation is contained, volatility will likely remain high."

The S&P 500 is now down about 13% from its record closing high set in early January. The Philadelphia Semiconductor Index jumped 3.6% to close at its highest level in nearly a month.

All eyes are now on the U.S. government's nonfarm payrolls data due on Friday, where investors will be looking for clues about the health of the U.S. economy and how aggressively the Federal Reserve will raise interest rates in the future. Analysts expect the U.S. to add 325,000 jobs in May.

As of the close, the S&P 500 climbed 1.84% to close at 4,176.82. The Nasdaq rose 2.69% to 12,316.90 and the Dow Jones Industrial Average rose 1.33% to 33,248.28.

Outlook

This trading day focuses on the US May non-farm payrolls report and the US May ISM services PMI data.



Analysts expect U.S. nonfarm payrolls growth to slow to 300,000 in May as demand for labor slows in some of the most interest-rate sensitive industries (housing, construction). This is in line with the climb in initial jobless claims in recent weeks. The continued shift in consumer demand from goods to services could also reduce labor demand in industries such as transportation and warehousing.

However, given the rapid wage growth and nearly two vacancies for every unemployed person, nonfarm payrolls should continue to grow, possibly returning to pre-pandemic levels by the end of the year.

Bloomberg Economics expects nonfarm payrolls to increase by 300,000. The median consensus estimate was for an increase of 325,000, with a forecast range of 250,000 to 450,000. The unemployment rate will remain at 3.6% and the labor force participation rate will edge up to 62.3%. Average average hourly earnings rose 0.3% month-on-month and 5.2% year-over-year.


Analysts expect the ISM services index may rebound in May from the previous month's decline, as the expansion of the services sector is gaining momentum as pent-up consumer demand during the pandemic is re-released. The index is expected to rise nearly 1 point, driven by indicators of new orders and employment. The employment gauge fell into contraction territory in April, falling 4.5 points to 49.5 from 54.0, but it was a one-off. Business feedback in the April data was much more upbeat than the data, possibly suggesting an upward revision to April's data.



At 10:24 GMT+8, spot gold is now at $1,871.96 per ounce.