Gold Market Shows Price Compression in June
The gold market has demonstrated significant sensitivity to the release of US jobs reports (NFP), often resulting in notable price movements following these data announcements. Historically, there has been an inverse relationship between gold prices and NFP surprises, with gold prices rising when NFP results fall short of expectations and declining when they exceed expectations. This trend is attributed to the implications for the US dollar and interest rate projections. Based on the historical data, the strongest negative correlation between gold prices and NFP surprises was observed 15 minutes after the data release, with a correlation coefficient of -0.52. However, this relationship weakened over longer periods, indicating that other market factors quickly influence price movements. Moreover, gold price compression in June is building a base for the strong rally.
Additionally, significant gold purchases by central banks, such as the National Bank of Poland, continue to bolster demand for the metal. Global economic indicators, including the weaker-than-expected China Caixin Services PMI, also play a role in shaping market sentiment. With an increased likelihood of a Fed rate cut in September, these developments collectively impact gold prices, making the upcoming economic data pivotal for determining future price trends.
Gold Price Consolidation Results in Inside Bar
The gold market has been exhibiting a long-term bullish pattern, with the breakout from $2,075 already initiating a strong rally to much higher levels. This breakout suggests that prices could reach $3,000 within a few months. The consolidation in June, part of a seasonal correction, has made this surge more authentic, resulting in another strong price move. June ended with an inside bar, indicating price compression, and a break above the June highs could trigger a strong rally. However, the employment data due tomorrow is critical and may cause prices to fluctuate further before any significant decision. Therefore, a cautious approach is recommended until a confirmed breakout is observed on the weekly chart following the NFP announcement.
Bottom Line
In conclusion, the gold market’s sensitivity to US jobs reports and economic indicators has led to notable price fluctuations, with a historical inverse relationship between gold prices and NFP surprises. June’s consolidation, influenced by seasonal corrections and significant central bank purchases, resulted in price compression, forming an inside bar that signals potential for a strong rally. The anticipation of a Fed rate cut in September and upcoming economic data, including the critical employment report, will play a pivotal role in determining the next direction for gold prices. As the market awaits these developments, a cautious approach is advised, with an eye on potential breakouts following key data releases.
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