• Nonfarm Payrolls in the US are forecast to increase by 200,000 in October.
  • Gold is likely to react slightly stronger to a disappointing jobs report than an upbeat one.
  • Gold's movement has no apparent connection with NFP deviation four hours after the release.

Historically, how impactful has the US jobs report been on gold’s valuation? In this article, we present results from a study in which we analyzed the XAUUSD pair's reaction to the previous 27 NFP prints*.

We present our findings as the US Bureau of Labor Statistics (BLS) gets ready to release the October jobs report on Friday, November 4. Expectations are for a 200,000 rise in Nonfarm Payrolls following the 263,000 increase in September.

*We omitted the NFP data for March 2021, which was published on the first Friday of April, due to lack of volatility amid Easter Friday.

Methodology

We plotted gold price’s reaction to the NFP release at 15 minutes, one hour and four hours intervals after the release. Then, we compared the gold price reaction to the deviation between the actual NFP release result and the expected result. 

We used the FXStreet Economic Calendar for data on deviation as it assigns a deviation point to each macroeconomic data release to show how big the divergence was between the actual print and the market consensus. For instance, the August (2021) NFP data missed the market expectation of 750,000 by a wide margin and the deviation was -1.49. On the other hand, February’s (2021) NFP print of 536,000 against the market expectation of 182,000 was a positive surprise with the deviation posting 1.76 for that particular release. A better-than-expected NFP print is seen as a USD-positive development and vice versa.

Finally, we calculated the correlation coefficient (r) to figure out at which time frame gold had the strongest correlation with an NFP surprise. When r approaches -1, it suggests there is a significant negative correlation, while a significant positive correlation is identified when r moves toward 1. Since gold is defined as XAU/USD, an upbeat NFP reading should cause it to edge lower and point to a negative correlation.

Results

There were 12 negative and 15 positive NFP surprises in the previous 27 releases, excluding data for March 2021. On average, the deviation was -0.86 on disappointing prints and 0.66 on strong figures. 15 minutes after the release, gold moved up by $3.97 on average if the NFP reading fell short of market consensus. On the flip side, gold declined by $3.22 on average on positive surprises. This finding suggests that investors’ immediate reaction is likely to be slightly more significant to a disappointing print.

However, the correlation coefficients we calculated for the different time frames mentioned above don’t even come close to being significant. The strongest negative correlation is seen 15 minutes after the releases with the r standing at -0.57. One hour after the release, the correlation weakens with the r rising to -0.42 and there is virtually no correlation to speak of four hours after the release with the r approaching 0.

Several factors could be coming into play to weaken gold’s correlation with NFP surprises. A few hours after the NFP release on Friday, investors could look to book their profits toward the London fix, causing gold to reverse its direction after the initial reaction.

It's worth noting, however, that the Fed announced in July that they have abandoned rate guidance and that they will assess the data releases before deciding on the next policy step. Hence, the Fed's data-dependent approach to policy could cause markets to react in a more significant way than usual. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD falls below 1.0500 after US NFP data

EUR/USD falls below 1.0500 after US NFP data

EUR/USD dropped below 1.0450 but managed to stage a modest rebound. The US Dollar preserves its strength against its rivals and doesn't allow the pair to gain traction after the data from the US showed that Nonfarm Payrolls rose by 263,000 in November.

EUR/USD News

GBP/USD turns south on upbeat US jobs report, trades below 1.2200

GBP/USD turns south on upbeat US jobs report, trades below 1.2200

GBP/USD lost nearly 100 pips with the immediate reaction to the upbeat November jobs report from the US and broke below 1.2200. The US Dollar Index clings to strong daily gains above 105.00 after the data showed that Nonfarm Payrolls rose by 263,000.

GBPUSD News

Gold retreats below $1,790 as US yields surge on US NFP

Gold retreats below $1,790 as US yields surge on US NFP

Gold price turned south and dropped below $1,790 in the early American session. The benchmark 10-year US Treasury bond yield is up more than 2% on the day near 3.6% after the bigger-than-expected November job growth, weighing heavily on XAU/USD.

Gold News

FTX exchange collapse, loss of $3.1 billion could have been avoided on one condition

FTX exchange collapse, loss of $3.1 billion could have been avoided on one condition

FTX exchange, founded by Samuel Bankman-Fried (SBF), has consistently made headlines over the past month for its liquidity crisis and triggering a collapse in the crypto ecosystem.

Read more

AMC advances more than 3% in premarket day after being halted

AMC advances more than 3% in premarket day after being halted

AMC stock is up 3.4% in Friday's premarket just a day after authorities halted trading due to unusual volatility. Thursday saw options volume three times higher than the 20-day average.

Read more

Majors

Cryptocurrencies

Signatures