Fed News

The US Non-Farm Payrolls report was released earlier today and showed that the U.S. labor market has cooled more than expected. The data points reinforced yesterday's comments about the new Fed chair, Kevin Warsh, at the ECB Central event. Warsh walked back hawkish Fed expectations for 2026, and the shortfall in job growth in the U.S. public sector seemed to support repricing of expectations that the Federal Reserve would not need to tighten policy in the near term. This led to a drop in U.S. bond yields, allowing gold prices to rally sharply. According to data released by the U.S. Bureau of Labor Statistics, the June Non-farm payrolls report showed that the U.S. economy added only 57,000 jobs in the public sector, which was well below the forecast of 110,000. Additionally, the April and May payroll numbers were revised lower by 74,000. Average hourly earnings month-on-month came in at 0.3%, matching market expectations and the prior number. The unemployment rate dropped from 4.3% to 4.2%, but this was largely due to lower labor force participation rather than better employment figures. As a result, Treasury yields fell, and the U.S Dollar lost ground across the board, allowing gold to climb above the 4100-ounce mark in one of its biggest single-day gains in recent weeks. A Breakdown of the NFP Numbers Here are the remarkable points in the June non-farm payroll report: 1. Only 57,000 jobs were added to the U.S. public sector. This represents one of the weakest payroll numbers in recent months. 2. The BLS revised the payroll numbers for April and May lower, indicating that the U.S. labor market was not as robust as previously thought. 3. A drop in unemployment rates was actually a result of declined labor force participation, meaning that more people chose not to participate in the survey conducted by the Bureau of Labor Statistics. Thus, the drop in the unemployment rate was not really because of improved employment numbers. 4. Wage inflation remains steady at 0.3%, which indicates that inflationary wage pressures did not accelerate whatsoever. These figures collectively tell the story of a labor market that is starting to cool, which is a scenario that does not support the view of a more aggressive Federal Reserve stance. How Gold Price Reacted The weaker-than-expected non-farm payroll print suggests that the U.S. economy, particularly the labor market, is losing momentum. This reduces pressure on the Fed to raise rates, as the outcome typically lowers U.S. bond yields and leads to capital flow away from U.S. dollar-denominated assets, thereby weakening the U.S. dollar. Gold is a non-yielding asset; therefore, a drop in bond yields reduces the opportunity cost of holding gold and other metal assets, making them more attractive to investors. Gold prices had dropped sharply to 3,980 dollars per ounce after the last Fed meeting, which the market interpreted as a hawkish hold. But following yesterday's Sintra comments from Fed Chief Kevin Warsh and today's NFP, the markets have repriced the chances of the Fed raising rates later in the year much lower, allowing gold prices to rebound. What should gold traders expect in the next few days? 1. Potential Bullish Momentum Presently, gold prices have received a strong bullish macroeconomic catalyst. A drop in U.S. Treasury yields could push yields even lower, putting the U.S. dollar under pressure and allowing buyers to attempt to extend today's value. However, traders must be wary of reduced trading volume on Friday, which is a holiday to mark U.S. Independence Day, observed on July 4th, a Saturday. 2. U.S. Treasury Yields Could Drop Further The focus will be on the 10-day U.S. Treasury note as it is one of the most important drivers of gold price in the near term. If yields on the 10-day Treasury note fall, it will reinforce the earlier bullish spike in today's move, which occurred while Asian markets were closed. Therefore, you could expect a bullish pop when the Asian markets open for trading Friday. Furthermore, the reaction of the U.S. bond market over the next few sessions will be critical in determining whether gold can sustain the day's gains or whether bullish momentum will be cut off. Remember that gold is currently in a downtrend and the upside pop is an upward retracement. 3. The markets are repricing Fed rate expectations The Sintra meeting comments by the Fed chief, as well as today's NFP report, have now reinforced the argument that the Fed can afford to leave rates unchanged for much longer than once thought. This view will be reinforced if upcoming inflation data show signs of cooling. This is an environment that would generally be supportive of a further rally in gold prices. However, Fed officials typically do not rely on a single employment report when deciding monetary policy, so traders will be best served by watching upcoming data as the primary drivers of any further pricing of Fed rate expectations. 4. Technical Outlook for Gold Prices Traders should watch for breaks of critical resistance levels and see if price holds above them as it reverses into new support. Furthermore, traders will have to watch whether the day's gains can be held with strong volume, and watch for any signs of potential profit-taking that could reverse today's gains and reinstate the downtrend. Takeaway On a final note, the two risk events for the week, namely the Fed Chair's comments at today's ECB Central event and today's NFP report, have provided bullish macroeconomic catalysts for growth prices. However, traders need to watch for clear direction in the next few trading sessions to determine whether the rally will continue or peter out, allowing the downtrend to prevail once more.