What’s Next for Gold, US Dollar, Yields & Nasdaq 100?

GOLD, YIELDS, US DOLLAR, NASDAQ 100 FORECAST

• Gold prices, Treasury yields, the U.S. dollar and the Nasdaq 100 will be quite sensitive to the November U.S. nonfarm payrolls report, as jobs data can have a direct impact on market pricing of the Fed’s policy path
• Strong employment growth will be bullish for yields and the U.S. dollar, but negative for gold and the Nasdaq 100
• Weak job creation is likely to be bearish for rates and the greenback, but positive for precious metals and tech stocks

Most Read: Gold Prices on Edge Ahead of Key US Jobs Data, Trade Setups on XAU/USD

The U.S. Bureau of Labor Statistics will release the November employment report on Friday morning, an event that could bring significant volatility to financial markets and give rise to attractive trading setups heading into the weekend.

According to consensus estimates, the U.S. economy generated 180,000 jobs last month after an increase of 150,000 payrolls in October. With this result, the unemployment rate is expected to remain unchanged at 3.9%.

Elsewhere, average hourly earnings, a powerful inflation gauge closely followed by the central bank, are forecast to have risen 0.3% m-o-m, bringing the 12-month reading from 4.1% to 4.0%, a positive, albeit small, directional improvement for policymakers.

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UPCOMING US JOBS REPORT

Source: DailyFX Economic Calendar

To sustain recent market dynamics—keeping Treasury yields and the U.S. dollar biased lower while maintaining the broader bullish momentum going for risk assets and precious metals, incoming data will have to validate overly dovish interest rate expectations by showing that the economy is starting to slow down sharply.

In the chart below, which displays the implied yield on all 2024 Fed funds futures contracts, we can see that rate-cut bets have risen aggressively in recent weeks, with traders discounting over 100 basis points of easing by the end of next year. Markets may be sniffing trouble on the horizon, or they may be dead wrong.

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2024 FED FUNDS FUTURES CONTRACTS (IMPLIED YIELDS)

Source: TradingView

Any data from the November employment report that contradicts the premise of broadening economic weakness and is inconsistent with too much easing over the next 12 months, such as robust job creation or extremely hot wage growth, could push traders to unwind extremely dovish monetary policy wagers, boosting yields and this U.S. dollar. This scenario would weigh on gold and the Nasdaq 100.

Conversely, disappointing NFP figures that surprise to the downside by a wide margin could have the opposite effect on markets by justifying concerns about brewing economic challenges and by supporting the case for several rate cuts in the coming quarters. This scenario, likely to apply downward pressure on yields and the U.S. dollar, could prove beneficial for gold prices and the Nasdaq 100.

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