Traders await Friday’s jobs report and next week’s FOMC meeting

Market participants are beginning to lighten their trading activities as the holiday season unfolds. We can expect to see volume decline as traders begin to square their books at the end of the year. Lower holiday volume can increase volatility, as it takes smaller positions to move the market. However, the volume in gold futures contracts remained steady around its average daily trading volume with 165,566 contracts traded.

That being said, traders are waiting to see if tomorrow’s jobs report strengthens the assumption that the Federal Reserve has completed its interest rate hike cycle. That will be confirmed when the Fed meets next week for the final FOMC meeting of 2023.

Gold has had fractional gains for the last two days after dropping from a new record high on Monday with the most active futures contract exceeding $2150 per ounce. As of 4:55 PM EST, gold futures basis the February 2024 contract is trading up by $2.00 or 0.10% and fixed at $2045.40. Today’s modest gains were highly supported by dollar weakness. The dollar traded to a low of 103.268 today before recovering slightly but is still trading under pressure, down 0.51% at 103.663.

As for the jobs report tomorrow, economists polled by Dow Jones are forecasting that the Bureau of Labor Statistics will reveal that approximately 190,000 jobs were added last month. On Tuesday, December 5 the BLS released data indicating a contraction in new hires indicating that there are an estimated 1.3 jobs available for every unemployed individual. This is one of the lowest job openings numbers seen since March 2021. Most importantly, it provides critical evidence that the U.S. labor market is cooling.

If the actual numbers tomorrow align with current forecast by economists, it should seal the fate of decisions made by the Federal Reserve at next week’s FOMC meeting. According to the CME’s FedWatch tool, traders are all readily convinced that the Federal Reserve will not raise rates next week, with a 97.5% probability. Currently, there is only a 2.5% probability that the Federal Reserve will implement one last rate hike this year of ¼%. While the probability that the Fed will maintain its current interest rate level has decreased from yesterday’s probability of 99%, it is well above the 90.2% probability that the CME’s FedWatch tool indicated one month ago.

Wishing you as always good trading,