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• Gold price has been hit hard after the release of solid US NFP data
• The US Dollar delivers V-shape recovery as upbeat US NFP data fade Fed rate cut hopes.
• Fed officials may continue supporting restrictive monetary policy for longer.

Gold price (XAU/USD) falls vertically as the United States Bureau of Labor Statistics (BLS) has reported robust Nonfarm Payrolls (NFP) data for January. US employers hired 353K new workers against the consensus of 180K and 216K fresh payrolls added in December. The Unemployment Rate remains unchanged at 3.7%, while investors anticipated a slight increase to 3.8%. The inflation outlook has turned extremely stubborn as Average Hourly Earnings grew at a robust pace than what market participants have estimated. 

Monthly Average Hourly Earnings were up by 0.6% against 0.4% growth in December. Investors projected a decline in growth by 0.3%. The annual wage growth was higher at 4.5% against expectations of 4.1% and the former reading of 4.4%.

The upbeat labor market data is expected to allow Federal Reserve (Fed) policymakers to lean towards keeping interest rates higher for longer. In the monetary policy statement, Fed Chair Jerome Powell said clearly that policymakers need greater confidence about inflation returning sustainably to the 2% target.

Daily digest market movers: Gold price comes under trouble on robust US wage growth

• Gold price faces an intense sell-off while the US Dollar has rebounded strongly after the release of the upbeat United States official Employment data for January.
• The NFP report shows that labor demand was robust, and employers have offered a higher wage growth to workers than market expectations.
• An upbeat wage growth data would accelerate fears of sticky price pressures, which could further dampen hopes of rate cuts by the Federal Reserve in March. 
• As per the CME Group Fedwatch tool, traders see a 57% chance for a 25 bps rate cut in May to 5.00%-5.25%, which is down after the release of the Employment data.
• Expectations for the first rate cut by the Fed after a two-year-long rate-tightening campaign were shifted to May from March earlier.
• In his last press conference, Fed Chair Jerome Powell said a dovish decision in the March meeting is unlikely as the central bank won’t get confident about inflation declining to the 2% target by then.
• Economic indicators such as robust consumer spending, a lower jobless rate, and a recovery in factory data have cast doubts among Fed policymakers about price stability.
• The US ISM reported on Thursday that the Manufacturing PMI for January rose sharply to 49.1 against expectations of 47.0 and the former reading of 47.1. Still, the PMI remained below the 50.0 threshold. The New Orders Index rose significantly to 52.5 vs. 47.0 in December. A robust factory order book indicates an improvement in demand.

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