Gold market analysis

"Gold Prices May Soon Enter a Correction Phase - Be Cautious" 3/7 11:00 am Completed 

The June private-sector employment change data released by the US private institution ADP yesterday is believed to have surprised investors. Employment positions decreased by 33,000, far worse than the market expectation of an increase of 99,000. It was the first decrease since February 2021 (78,000 in January 2021), and the number of new positions added in May was revised down from 37,000 to 29,000. Nela Richardson, chief economist at ADP, said that although layoffs remain rare, the decrease in June was due to companies' reluctance to hire new employees or replace those who left. However, the slowdown in hiring has not yet affected salary growth. 

Tariffs affect enterprises' recruitment activities. 

In my opinion, the reluctance of enterprises to hire or fill positions in June is related to the expiration of the suspension of reciprocal tariffs on July 9th. However, as of now, the United States has reached a trade framework agreement with China, and has recently reached an agreement with Vietnam. India is next, and the European Union is also striving to reach an agreement with the United States before the deadline. Subsequently, ten countries will succeed, while Japan's situation remains uncertain. Therefore, investors should consider that even if the non-farm payroll report for June is poor, there may be a significant turnaround in July. Moreover, the ADP's non-farm employment change data does not always closely match the official figures and sometimes even shows a negative correlation. Therefore, it is not advisable to treat the two sets of data as equivalent. 

As this Friday marks the Independence Day of the United States, the US Department of Labor will release the June non-farm payroll report today ahead of schedule. Currently, the market expects an increase of 120,000 non-farm jobs and the unemployment rate to rise from 4.2% to 4.3%. The ADP employment data has raised concerns among investors that the official employment figures will also be poor, thereby increasing the probability of the Federal Reserve cutting interest rates in July and causing the US dollar exchange rate to fall after the release of the ADP data. 

Don't be overly optimistic before the 20-day moving average is held steady. 

Spot gold prices fluctuated after the release of the data, surging by more than $11, then sharply falling back to $3,343 before rising again. However, after reaching a high of $3,351, it repeatedly declined and even fell below the pre-data release low, touching $3,334 before climbing again. After the London market closed, it briefly rose above the $3,350 level and in the early Asian market, it rose to $3,365, but then sharply dropped and returned below $3,350. 

From the hourly chart, the pullback of gold prices from the high of $3,357.97 is extremely close to the 38.2% retracement of wave 3. After breaking through the top of wave 3 this morning, it quickly fell back, which likely indicates the completion of wave 5, followed by an abc corrective wave. A break below the top of wave 1 at $3,296.52 would signal the start of a higher-level wave 3. From the double top formation, $3,327.73 is the neckline. Once this level is breached, the measured decline target is $3,289.71. Gold prices are currently in a stalemate at the 20-day SMA ($3,349.15). Before it clearly closes above this line, it is not advisable to be overly optimistic. Investors can use a smaller time frame, such as the 5-minute chart, and operate based on technical signals to avoid falling into the trap of subjective wishes. 

The above content is for reference only and does not constitute investment advice. 

MTFSpecial Analyst Zheng Guangfu