Why gold price still stuck around $1,750 among the disappointing employment report?

Gold prices were flat on Monday as the bullion was caught between a dip in the dollar and fears that the U.S. Federal Reserve would start paring stimulus this year despite weak jobs data.

Spot gold was flat at $1,756.25 per ounce in Monday morning.

With gold unable to deliver a rally despite a disappointing U.S. September employment report, analysts weigh in on gold's sticky price levels.

The U.S. September jobs report surprised on the downside with just 194,000 positions added versus the expected 500,000. This is a big miss considering that Federal Reserve Chair Jerome Powell needed "a reasonably good report" to begin tapering as soon as November.

"We had a big miss on the jobs number. The bad news is good news for gold. That's because the market believes the Fed can't get as aggressive next month with tapering or future rate hike timeline," RJO Futures senior market strategist Frank Cholly told Kitco News. "It comes down to the Fed not being in a position to take away the punch bowl just yet."

In response to the employment report, gold jumped $20 to a daily high of $1,781. However, gold ended up giving up all of its gains as the U.S. Treasury yields began to climb.

"As have been true for past months, gold prices have been very sensitive to economic data," said Gainesville Coins precious metals expert Everett Millman. "The two areas pulling safe-haven demand away from gold have been the bond and crypto markets."

With economic data getting worse, gold could be in for a shift in sentiment. But it does need to find the appeal of new buyers as an inflation hedge, which so far has been the U.S. dollar and bitcoin.

"Economic data seems to be trending down. Inflation is still rather high. All of that is fairly gold positive. Especially because we are seeing inflation now outside of the U.S, it does seem that that train is not going to stop rolling even though Powell is saying price increases are transitory," Millman told Kitco News.

Bullish sentiment in gold improves but prices are still stuck around $1,750

The latest Kitco News Weekly Gold Survey shows that both Wall Street analysts and Main Street retail investors are solidly bullish on gold in the near term.

Ole Hansen, head of commodity strategy at Saxo Bank, said that the precious metal continues to walk a fine line even as the Federal Reserve is expected to shift its monetary policies and start reducing its monthly bond purchase before the end of the year.

"[The September Non-Farm Payrolls, was cold enough to support gold and still strong enough to support tapering," he said.

This week 14 Wall Street analysts participated in Kitco News' gold survey. Among the participants, eight, or 57%, called for gold prices to rise. At the same time, five analysts, or 36%, called for lower gold prices next week. One analyst, or 7%, was neutral on gold in the near term.

Meanwhile, A total of 841 votes were cast in online Main Street polls. Of these, 442 respondents, or 53%, looked for gold to rise next week. Another 265, or 32%, said lower, while 134 voters, or 16%, were neutral.

Photo: KITCO

Sentiment in the gold market among retail investors has improved steadily after falling to a multi-month low last month. However, the improved sentiment comes as gold prices remain shackled to support at $1,750 an ounce. The disappointing September employment numbers helped to push gold prices to a two-week high; however, the market was unable to break initial resistance above $1,780 an ounce.

December gold futures last traded at $1,759.20 an ounce, roughly unchanged from last week.

Some analysts have said that while it is inevitable that the Federal Reserve will reduce its bond purchases, the weak labor market data could provide some near-term momentum in gold as investors push back on when the Fed will eventually reduce its monthly bond purchases.

"Once the Fed actually starts its tapering—if it ever does—the market will see that it's too little too late, and—as it usually does once the Fed starts tightening—gold will bottom and reverse. It did this in 2005, 2013 and 2015," said Adrian Day, president of Adrian Day Asset Management.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he could see gold prices rise in the near term as the U.S. dollar loses some momentum ahead of next month's Federal Reserve monetary policy meeting, particularly as uncertainty over tapering starts to rise.

However, not all analysts are convinced that gold is ready to break its chains just now. Mark Leibovit, publisher of VR Metals/Resource Letter, said he sees the current price action as a dead cat bounce.

Marc Chandler, managing director at Bannockburn Global Forex, said that he sees gold prices holding resistance between $1,780 and $1,800 in the near term.

"I do not think the jobs disappointment is material in the sense that I see still Fed tapering next month. The disappointment also really knocked U.S. long-term yields down, including in the Fed funds futures market, which is pricing in more 25 in Sept 2022," he said.

Adam Button, chief currency strategist at Forexlive.com, said that he is waiting for one more washout in gold before he looks to buy. He added that he doesn't expect to buy gold before November when the market sees strong seasonal factors.

"Right now, you have to be patient if you want to buy gold. I want to buy when there is panic selling," he said.