Gold trades higher as both geo-political and economic concerns are elevated

Today’s strong recovery in gold was based on two important factors. The first is a delayed reaction to Friday’s jobs report, and the second is an increased geopolitical concern regarding Israel's long-promised ground invasion of Rafah in Gaza.

On Friday the latest U.S. jobs report showed a slowdown in hiring, with nonfarm payrolls increasing by 175,000 in April, down sharply from March's robust 315,000 new jobs, with the unemployment rate holding steady at 3.9%. The cooler jobs data indicates that the Federal Reserve's elevated interest rate hikes are beginning to temper labor market momentum, however, we did not see any real reaction immediately following the release of the report on Friday. Rather the delayed response to the jobs report occurred today.

That being said, we did see a strong reaction to the jobs report on Friday in U.S. equities, with the Nasdaq surging 1.99%, the Dow Jones Industrial Average climbing 1.18%, and the S&P 500 gaining 1.26%. However, Gold closed lower on Friday disregarding the information until today.

Over the weekend the Israeli army had ordered tens of thousands of people in the southern Gaza city of Rafah to begin evacuating. This most likely signals that Israel intends to go through with a promised ground invasion in Gaza. Concurrently, multiple countries such as the U.S., Egypt, and Qatar have been pushing hard for a cease-fire agreement. At the time of this writing the Israeli prime minister has stated that the military would follow through with its plan “with or without” a cease-fire deal.

According to the Associated Press in Jerusalem, “Hamas announced its acceptance Monday of an Egyptian-Qatari cease-fire proposal, but Israel said the deal did not meet its “core demands” and that it was pushing ahead with an assault on the southern Gaza town of Rafah. Still, Israel said it would continue negotiations.”

More importantly, the article by the Associated Press said, “The high-stakes diplomatic moves and military brinkmanship left a glimmer of hope alive — but only barely — for an accord that could bring at least a pause in the 7-month-old war that has devastated the Gaza Strip. Hanging over the wrangling was the threat of an all-out Israeli assault on Rafah, a move the United States strongly opposes and that aid groups warn will be disastrous for some 1.4 million Palestinians taking refuge there.”

These two factors moved gold futures substantially higher. Basis the most active June 2024 Comex contract gold futures gained $22.60 during New York and Globex trading, fixing the precious yellow metal at $2331.20. Trading just resumed Tuesday morning in Australia with gold futures gaining an additional $2.80 taking the most active futures contract to $2334.

These two factors could be highly supportive of gold moving higher this week.

Wishing you as always good trading,