XAU/USD: gold has room to grow
Initial jobless claims fell by 18,000 in the week of Feb. 20-26 to 215,000, the US Department of Labor said on Thursday, compared with a revised value of 233,000 the previous week. Thus, the number of initial claims for unemployment benefits in the US last week remained near historical lows, which indicates a shortage of resources in the country's labor market.
The report came as another confirmation signal after the release of ADP private sector employment data on Wednesday on the stability of the US labor market after its precipitous fall in early 2020 due to the coronavirus pandemic. Now market participants are waiting for the publication today at 13:30 (GMT) of the official monthly report of the US Department of Labor with data on employment in February. Economists expect wages to rise, jobs to rise by 440,000 and unemployment to fall to 3.9%. These are very strong indicators, which should reinforce the market's opinion that the Fed is determined to tighten its monetary policy.
Yesterday, speaking before the US Congress, the head of the Fed, Jerome Powell, said that he did not exclude that the agency would take a wait-and-see attitude during the March meeting, given the situation around Ukraine. Although, personally, he is determined to raise the interest rate.
Meanwhile, market participants prefer to take a wait-and-see position on the eve of the publication of the official report of the US Department of Labor, hoping to receive additional confirmation of the possibility of raising interest rates during the March meeting of the Fed.
Moderate pressure on the position of the dollar is exerted by macroeconomic statistics published yesterday from the US. Thus, the PMI index in the services sector from ISM fell to 56.5 in February (against 59.9 in January and the forecast of 61.0). The employment index in the services sector from the ISM for the same period also fell sharply (to 48.5 from 52.3 and against the forecast of 53.5).
Uncertainty around the military conflict in Ukraine has a negative impact on investor sentiment, supporting the traditional defensive asset gold. It is not known to bring investment income, but is a popular defensive asset, especially in the face of rising inflation and geopolitical tensions. Its quotes are extremely sensitive to changes in the monetary policy of the world's leading central banks, especially the Fed. When it tightens, the quotes of the national currency (under normal conditions), as a rule, grow, while the price of gold falls.
However, as we can see from the long-term charts, its price is not going to fall. At the time of writing this article, the XAU/USD pair is near 1938.00, preparing to end this week higher.
According to analysts of the gold market, the dynamics of its prices will depend on "whether investors' fears about inflation will intensify and whether interest rates will rise faster than expected". At the same time, we can assume that gold has room to grow, given the military conflict between Russia and Ukraine.