Unexpected! US November non-farm payroll defies expectations, gold weakens and dips below $2000!

On Friday, December 8th, the US November non-farm employment report showed unexpectedly strong results. Non-farm payrolls increased by 199,000 last month, the unemployment rate fell to 3.7%, and monthly wage growth exceeded expectations. Simultaneously, US consumer confidence rebounded sharply in early December, exceeding all forecasts, as American households lowered their inflation expectations for the coming year to the highest level in 22 years. This further weakened the gold price.
Saturday, December 9th, was a market holiday.
On Friday, December 8th, after hitting a record high of around $2150 per ounce earlier in the week, gold prices gave back much of their recent gains during the first week of December.
Opening at a record high of $2150 per ounce during Monday's Asian trading session, the precious metal followed a steady downward trend over the next few days, holding onto support near $2000 per ounce by Friday afternoon. The gold market saw price swings exceeding $140 per ounce this week, the largest volatility since mid-August 2020.
Bearish pressure hit gold prices again, pushing them down towards $2000. The situation didn't improve after the better-than-expected US employment data was released. Next week, the market will await the Federal Reserve's statement. If gold prices continue to weaken, traders can wait for long opportunities near $1953 and the 200-day moving average.
Key levels to watch today:
Support levels: $2,000, $1,950, $1,900, $1,850, $1,800
Resistance levels: $2,069, $2,074
On Friday, December 8th, the release of two robust economic data points jolted the market, with US equities rallying on speculation that the US would be able to avoid a recession. Conversely, bond traders were forced to pare back bets on rate cuts in 2024, leading to a surge in yields.
The prevailing sentiment on Wall Street is that while the strong economy alleviates many investors' concerns about a hard landing, it also means the Fed may have to keep interest rates higher for longer. For US Treasuries, this means unwinding the massive dovish trades that pointed to a Fed pivot as early as March. For equities, the resilience in employment and consumer spending is a positive sign for US businesses.
Chris Zaccarelli, an analyst at Independent Advisor Alliance, stated: "Just when you think the economy is finally starting to soften, it continues to show strength. We remain bullish on the market because we are bullish on the economy."
Following a series of data highlighting a slowdown in the labor market, Friday's non-farm payrolls report showed unexpectedly strong results. Non-farm payrolls increased by 199,000 last month, the unemployment rate fell to 3.7%, and monthly wage growth exceeded expectations. Simultaneously, US consumer confidence rebounded sharply in early December, exceeding all forecasts, as American households lowered their inflation expectations for the coming year to the highest level in 22 years.
Callie Cox, an analyst at eToro, believes that the strong employment data may be "a harsh reality check for Wall Street" after the market rallied significantly on rate cut trades. However, she notes that this hope was somewhat excessive.
John Leiper, an analyst at Titan Asset Management, stated: "The US economy continues to perform well. The sharp drop in US Treasury yields that we saw last month looks a bit overdone, and that's reversing as bond yields rise. The longer-term upside is back in vogue as the market digests rate cuts next year."
Weak inflation and employment data over the past month led investors to believe that the Fed was done raising rates, prompting bets on at least a 125-basis-point cut in the next 12 months. Traders have pared back easing bets to around 110 basis points.
Neil Dutta, an analyst at Renaissance Macro Research, stated: "Those who say recession need to take a good look in the mirror."
Traders are preparing for another busy week, with the US Consumer Price Index and retail sales data, a compressed Treasury auction schedule, and the Fed's final meeting of the year all on the agenda.
While the Fed takes center stage next week, the Bank of England and the European Central Bank will release monetary policy decisions, with rates expected to remain unchanged. However, investors are still eager to know if their tightening bias will shift.
Some analysts suggest that next week will be a crucial test for the gold market, as a hawkish Fed could put downward pressure on an already sensitive market following gold's recent plunge.
The latest Kitco News weekly gold survey shows that most retail investors still expect prices to rise next week, while a majority of market analysts have turned bearish or neutral on gold's near-term outlook.
Fifteen Wall Street analysts participated in Kitco News' gold survey this week, with only 3 experts (20%) expecting gold prices to rise next week. Eight analysts (53%) predict a decline in gold prices, while the remaining 4 experts (27%) hold a neutral stance on gold for the coming week.
Meanwhile, Kitco News' online poll received 729 votes, with market participants maintaining a bullish outlook for the coming week despite this week's equity market decline. 428 retail investors (59%) expect gold prices to rise next week. Another 167 respondents (23%) expect lower prices, while 134 respondents (18%) hold a neutral stance on the precious metal's near-term outlook.
Although gold prices may struggle next week, some analysts point out that the market is still in good shape. Joseph Cavatoni, World Gold Council's North American market strategist, recently stated that he doesn't see much harm in Monday's failed rally. He said the rally shows how much potential the precious metal has when market conditions are right.
Nevertheless, gold may strengthen in the coming months, especially if interest rates decline and global economic conditions deteriorate further. A recent series of economic data from the US, Asia, and the Eurozone suggests that economic growth will cool in 2024.