Gold price staged a strong comeback last week, reaching its highest level since July 17 after the US released the Bureau of Labor Statistics (BLS) released a weak non-farm payrolls (NFP) report. It jumped to $4,367, up by 10% from the year-to-date low.
US Inflation Data and GLD ETF Inflows
Gold jumped after the US released a weak nonfarm payrolls (NFP) report. According to the to the BLS, the economy lost 23,000 jobs last month, missing the average estimate of 85k. It was the worst job report since February when the economy lost 92k jobs.
The jobs report dragged US bond yields lower. The ten-year yield dropped to 4.65%, while the five-year and 3-month note fell to 4.36% and 3.80%, respectively. This retreat happened as investors scaled back their Federal Reserve rate hike expectations. The US Dollar Index (DXY) also dropped by over 2% from the year-to-date high.
The next important catalyst for gold will be the upcoming US consumer inflation report on Wednesday this week. Economists expect the report to show that the headline Consumer Price Index (CPI) dropped from 3.5% in June to 3.4% in July. The core CPI is expected to drop from 2.6% to 2.5%. A lower-than-expected inflation report will be bullish for gold as it will reduce the odds of the Fed hiking rates.
American investors have started to accumulate gold ETFs. According to ETF Db, the popular SPDR Gold Shares (NYSE:GLD) added $896 million in inflows last week. It has added over $1.78 billion worth of assets in the last month, bringing its assets under management to $141.5 billion.
Gold Price Technicals Suggest More Gains
Gold formed a double-bottom pattern at $3,940, its lowest swing on June 30 and July 17. It has moved above this pattern’s neckline at $4,200, its highest point on July 6.
Gold has now jumped above the 50-day Exponential Moving Average (EMA). At the same time, the Relative Strength Index (RSI) has continued rising and is slowly approaching the overbought level of 70. That is a sign that the bullish momentum is continuing.
Therefore, the combination of its strong technicals, weak labor market, weaker US dollar, and falling US bond yields mean that the price may continue rising in the near term. If this happens, the next key target to watch will be at $2,500.
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