Gold – Weak Jobs Data Gives Gold Its First Real Bounce

Gold trades around $4,165 today, rising for a second day after Thursday's jump of more than 2%. The trigger was the US jobs report. The economy added only 57,000 jobs in June, about half of the expected 110,000. On top of that, the numbers for April and May were revised down by 74,000 combined. The labor market is clearly cooler than it looked a week ago.

Why did gold rise on this? Weak jobs data means the Fed has less reason to raise interest rates soon. Gold pays no interest, so when rate expectations fall, gold becomes more attractive. Before the report, traders expected a possible rate hike in September. Now most of them think the Fed will wait until December.

One detail to keep in mind: the unemployment rate fell to 4.2%, but mostly because fewer people are looking for work. That's not a sign of strength.

Is this a real turn for gold, or just a bounce? One weak report isn't enough to change the Fed's mind. Inflation is still above 4%, and that remains the Fed's main focus. Gold needs more weak data, or softer inflation, to build a real recovery.

Also note: US markets are closed today for Independence Day. Trading is thinner than usual, and that can make price moves sharper in both directions.

Gold key levels: 

• Resistance: $4,200, then $4,260 
• Support: $4,100, then $4,000

Watching: the US dollar, Fed officials' comments next week, US inflation data later this month.

By Born2trade market research department

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