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Trading Gold & USD Before NFP

June 1, 2023
Frank Cabibi

Gold is up nearly half a percent today while USD down a third of one as of 10:18 am EST. As we wait for the upcoming and looming NFP numbers this Friday, we can assess the economic data we already have.

EdgeFinder Analysis

The stock market sighed in relief after the debt ceiling bill finally made its way through the House. It's now passed on to the Senate to vote. This event has left immense pressure on the indices up until recently. Now, investors have their eyes on NFP numbers tomorrow.

On the EdgeFinder, the NASDAQ is a neutral rating at +2. Something important to note is that a Fed governor, Philip Jefferson, spoke about monetary policy. He iterated that a rate pause would give them time to analyze a 5.25% interest rate on inflation over time. This dovishness is also boosting risk appetite.

GU took off on today's USD news. The majority of investors are expecting a rate pause this month after a dovish speech from one of the governors of the Fed. Although NFP will likely set the course for dollar direction, we can assess the economic data we have now.

On the technical side, price is pairing the majority of its losses from most of May. The pair could come up to test the rising trend line on the 1D timeframe should momentum continue and risk-on sentiment increase. A double top lies around 1.26620s.

Gold has a handful of metrics going against it right now, according to the EdgeFinder. Those being lower unemployment, higher interest rates, poor trend readings and seasonality. As we enter a historically bearish month on the 10 year average, we should also take a look at the fundamentals going forward.

This morning, we saw higher jobless claims from last month, a miss in PMI, falling bond yields, extremely lower expectations on NFP, and an expected higher unemployment rate. All of which is bullish for the metal. However, gold is highly dependent on future interest rate expectations. Investors still need to see lower NFP tomorrow to help confirm a rate pause this month.

Retail Spotlight

Retail looks to be majority mixed USD, bearish gold and indices. From market experience or from following us, you may have realized that the crowd is usually never right. If there is a strong retail presence going one way, price is more than likely going the other way.

Seasonality Study

Interesting seasonality study on the gold asset. The chart above reflects the 10 and 5 year average price performance on a month-to-month basis. There is some contradicting data for the month of June as the 10 year shows major decline while the 5 year points higher. What this data tells us is that in recent years, gold has had a positive month in June.

Fundamental Spotlight

Lower PPI across the board reflects the effectiveness of monetary policy overall. As inflation comes down, so might the hawkishness of the Fed, BOC, BOJ, RNBZ. This will be ultimately bearish for any currency, but bullish for assets such as gold and indices.

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