【MACRO Insight】 Analysis of the rebound of US non-farm data and gold price trend

The seasonally adjusted non-farm payrolls in the United States in November increased by 227,000, the largest increase since March 2024, exceeding the expected 200,000, and the previous value was revised up from 12,000 to 36,000. The US unemployment rate in November was 4.2%, in line with expectations, and the previous value was 4.10%. The average hourly wage in the United States in November increased by 0.4% month-on-month, higher than the expected 0.3%, and the same as the previous value; it increased by 4% year-on-year, exceeding the expected 3.9%, which was also the same as the previous value.

The Bureau of Labor Statistics said employment in industries such as health care, leisure and hospitality, government and social assistance rose, while retail jobs fell. The sharp rebound in job creation in the United States in November from the previous month was mainly due to the fact that the October reading was dragged down by hurricanes and the Boeing strike. Market participants had widely expected the November data to exceed the underlying trend.

But the monthly rate of average hourly wages looked strong, reaching 0.4%, exceeding expectations. And rising unemployment is not a good thing, especially when the labor force participation rate is declining. Analysts said that at first glance at this report, we do not see signs of a recession. The job market has not hit the bottom, but there are indeed signs of slowing down. Considering the Fed's benchmark interest rate, the upper limit of the target range is 4.75%, which is more than one percentage point higher than the core inflation rate, and the reason for further rate cuts remains tenable.

The nonfarm payrolls report is one of the last batches of big data the Federal Reserve will consider before deciding whether to cut interest rates for a third time in a row at its December meeting. Fed Chairman Jerome Powell said this week that the Fed can be “a little more cautious” about cutting rates because the U.S. economy is in “very good shape” and inflation is slightly higher than previously expected.

The market generally expects that the non-farm population will record 200,000, much higher than last month's 12,000; the unemployment rate is expected to rise slightly from 4.1% to 4.2%, but many economists also expect the unemployment rate to remain unchanged. What impact will the non-farm data to be released tonight have on the price trend of gold？ Traders seem reluctant to make aggressive directional bets before the data is released.

Nancy Vanden Houten, chief U.S. economist at Oxford Economics, estimated that the hurricanes caused a loss of about 75,000 jobs in October, but about 60,000 of them returned to work by November. In addition, the end of the Boeing and Textron Aviation strikes may have added as many as 38,000 jobs in November. Overall, Vanden Houten wrote in a commentary that the November jobs report is likely to show that hiring activity remains “relatively strong.”

Diane Swonk, chief economist at tax and advisory firm KPMG, warned that the job market “may be softer than it appears.” Vanden Houten of Oxford Economics noted that so far this year, the Labor Department has revised down its preliminary job growth estimates for seven months. While fewer Americans are unemployed, those who have lost their jobs have had an increasingly difficult time finding them again. In October, the average unemployed American stayed out of work for 22.9 weeks, the longest level in two and a half years.

Improved inflation and slowing hiring have reduced pressure on businesses to raise wages and prices, prompting the Fed to cut interest rates by 50 and 25 basis points in September and October, respectively, and the market now expects the Fed to announce another rate cut at its December meeting. According to the CME Fed Watch tool, traders are pricing in a 70% chance of a December rate cut and a 30% chance of a pause. However, recent comments from several influential FOMC votes, including Fed Chairman Powell, suggest that the Fed may pause its rate cut cycle.

Gold prices remained at a one-week low on Friday, although a combination of factors provided some support and helped limit further depreciation, including concerns about Trump's trade tariff policy and Russia's continued use of long-range weapons and ground offensives in Ukraine in the past week.

Gold prices appear to be biased towards the bears in the short term. From a technical perspective, an intraday break below the 100-day smooth moving average (SMA) on the 4-hour chart and short-term support near the $2,633-2,632 area is seen as a key bearish trigger. However, the subsequent rapid recovery needs to be treated with caution. Any further recovery may face some resistance near the $2,655 level. Follow-up buying that takes gold prices above Friday's high of $2,666 area will turn bullish and enable gold prices to reclaim the $2,700 mark.