Trend-setting US data

New month, new luck. September has a rather difficult reputation, at least among equity investors – I shudder remembering 11 September 2001 or the Lehman shock in September 2008. This Tuesday, many US traders likely felt uneasy after the Nasdaq Composite dropped by more than 3 per cent.

US data on job vacancies disappoint

However, the financial markets’ real focus this week will be on US labor market data, to be published on Friday. Yesterday’s data on US job vacancies in July already provided a small foretaste. They were much weaker than expected at around 7.67 million, the lowest level since January 2021. The ratio of job openings to registered unemployed was down 1.07 – the lowest level since 2018.

Fed: rate cut ahead

In an immediate reaction on the interest rate futures markets, a robust initial interest rate cut of 0.5 percentage points was priced in with a 50 per cent probability for the Fed meeting on 18 September. This caused a noticeable drop in yields, particularly on short-dated US Treasury bonds. Apart from the market turbulence on 5 August, two-year bonds yielded less than their ten-year counterparts for the first time since 2022. The US dollar depreciated moderately. Both factors tend to favorably influence the gold price.

August labor market data, to be released on Friday, should be decisive for market expectations regarding the Fed interest rate turnaround. If, as expected by the market consensus, more than 150,000 new jobs were created and unemployment goes down slightly from 4.3 per cent, the scales are likely to once again tilt towards a 0.25 per cent rate cut, which could come as a disappointment to gold investors.

Weak commodity prices

However, other factors could also determine the current price development of gold. Weak industrial data from China and the US, for example, have sent oil and copper prices plummeting, with oil trading at its lowest level since the end of 2023. In this environment of weak commodity prices, gold held up like the proverbial rock in the surf but has also weakened week on week.

Gold remains near 2,500 US$ per ounce mark

Last Thursday morning, gold traded at 2,519 US$ per ounce and rose intraday to 2,528. As the US had a long weekend ahead due to the public holiday on Monday, positions were apparently smoothed on Friday. The gold price dropped to 2,502 at the end of the week. This week, the precious metal traded mostly around 2,495/2,500. Possibly for similar reasons as at the beginning of August – profit-taking through gold sales to cover losses on other positions – it weakened to 2,472 yesterday morning, but quickly recovered to 2,495. Gold will start European trading this morning at 8:00 at around 2,500 US$ per ounce.

The Xetra-Gold price also weakened slightly from the previous week, although the moderate depreciation of the euro against the US dollar cushioned the fall. It initially rose from 72.70 € per gram last Thursday morning to 73.70 on the same afternoon but then fell back to 71.95 yesterday morning. This morning, Xetra-Gold is likely to start the European trading day slightly recovered at around 72.60 € per gram.

Friday’s US labor market report will likely have a significant impact on the financial markets. The ECB will meet next week and most likely decide in favor of an interest rate cut. The Fed will follow on 18 September.

Enjoy the last days of summer and please note that the next market commentary will be published on 19 September.