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Taking a look at the US Labor report there is a chance that gold can recover its recent losses if we see a big miss in the report. Remember that the Fed sees the labor market through an inflationary or deflationary lens. If the labor market is strong, that is seen as inflationary. If the labor market is weak, that is seen as deflationary.
The inflation picture (being higher) has been driving yields and the USD higher recently ever since the Fed had a higher for longer rate narrative. So on Friday here is what to look for.
If the US non-farm payroll comes in below 90,000 and the unemployment rate comes in above 3.9% then watch for significant gold upside. The market wants to find a reason for the recent surge in yields and the dollar to pullback. A weak jobs report would be just the reason.
From an event bias, gold tends to gain out of the US labor report with an average return of nearly 0.5% in the 4 days after the report. So, with gold having sold off heavily on the higher rates for a longer narrative would a weak jobs report give the catalyst that gold needs for a sharp retracement higher?
Major Trade Risks: The major trade risk here is that the US jobs print comes in strong.
Video Length: 00:03:31
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