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The market predicts that the July non-farm payrolls will be disappointing, which may push the gold price to a high of $2,483!

2024-08-02

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At 20:30 (Friday), the US will release the July non-farm report. This employment report will not be the last report before the September FOMC policy meeting, but it will be the first report for the third quarter and the second half of the year. Therefore, the data may be symbolic, especially after the Fed decided to put the September rate cut on the table, but did not provide information on whether there will be further rate cuts after the November presidential election.

July non-farm forecasts are disappointing

The market expects a non-farm increase of 175,000 in July, lower than the previous value of 206,000. Goldman Sachs economists expect the employment data to be weaker than generally expected. They expect 165,000 jobs to be added in July.

Chris Lau, head of the SA investment group at DIY Value Investment, expects non-farm payrolls to increase by only about 120,000 in July, driven by job growth in the healthcare and government sectors.

The German Baden-Württemberg State Bank has the lowest expectation of only 70,000, while Bank of America has the highest expectation of 225,000. The non-farm in June was 206,000, slightly higher than the expected 190,000.

According to the market consensus, the change in the number of non-farm payrolls in the private sector in the United States in July was 148,000, slightly higher than the previous value of 136,000. The unemployment rate in July remained at 4.1%.

The labor force participation rate in the United States in July is expected to be 62.6%, and the U6 unemployment rate in the United States in July is 7.4%, both consistent with the previous value.

The annual average hourly wage rate in the United States in July is expected to be 3.7%, slightly lower than the previous value of 3.9%. The monthly average hourly wage rate in July was 0.3%, the same as the previous value. The average weekly working hours in the United States in July were 34.3 hours, the same as the previous value.

Previously released data showed that the number of initial unemployment claims in the United States in the week ending July 27 was 249,000, slightly higher than the previous value of 235,000. This data is the highest since August 2023. However, these figures may be distorted by Hurricane Beryl; however, the storm may also affect the non-farm payroll report.

The September rate cut is a foregone conclusion, what's next?

All in all, a 25bp rate cut by the Fed in September is a done deal, with a small minority of investors expecting a more aggressive 50bp rate cut. Perhaps, unless employment data deteriorates sharply and inflation falls to the Fed's 2.0% target, a bold double rate cut may still be a disadvantage.

At the same time, if the non-farm payrolls report performs worse than expected, including slower wage growth and/or another small increase in the unemployment rate, it may raise the prospect of a second rate cut in the coming months. The futures market shows a 60% chance of a 25bp rate cut by the Fed in November, and investors are convinced that another rate cut may be in December.

Possible market reaction to non-farm data

As for the market's reaction, if the July non-farm data is really disappointing, the US dollar may lose further ground, pushing gold prices close to the historical high of $2,483 and even approaching the psychological level of $2,500. The $2,550 limit zone may be the next target.

In the opposite scenario, with nonfarm payrolls again exceeding 200,000 and wage growth showing some strength, investors may lower their expectations for a 50 basis point rate cut in September and may lose confidence in a second rate cut in the coming months. As a result, the dollar may attract new buying interest, pushing gold prices down to $2,385-2,410. A break below the 50-day moving average could raise concerns about a bearish trend reversal, triggering an acceleration of price declines toward the $2,320 area.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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The market predicts that the July non-farm payrolls will be disappointing, which may push the gold price to a high of $2,483!

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