• In the US, nonfarm payrolls are expected to rise by 200,000 in February.
• A poor job report will likely cause gold to react more strongly than positively.
• By the fourth hour following the release, the inverse link between the gold price and the NFP surprise had somewhat weakened.

How much of an effect has the US jobs data historically had on the price of gold? This article presents the study’s findings, which examined how the XAU/USD pair responded to the previous 35 NFP prints*.

We provide our findings as the US Bureau of Labor Statistics (BLS) prepares to release the February jobs data on Friday, March 8. After a larger-than-anticipated 353,000 increase in January, nonfarm payrolls are forecast to climb by 200,000.

Techniques

Following the release, we plotted the gold price’s response to the NFP print at intervals of fifteen minutes, an hour, and four hours. Next, we examined how the gold price responded to the difference between the actual and predicted results of the NFP release.

Since the FXStreet Economic Calendar allocates a deviation point to each macroeconomic data release to indicate the magnitude of the divergence between the actual print and the market consensus, we used it to obtain data on deviation. For example, the August 2021 NFP data had a divergence of -1.49 and significantly undershot the market forecast of 750,000. However, the 2021 February NFP print of 536,000, which came in below the market estimate of 182,000, was a welcome surprise, with the divergence for that announcement standing at 1.76. A stronger-than-expected NFP print and vice versa are viewed as positive developments for the USD.

To determine the period at which gold had the strongest correlation with an NFP surprise, we finally computed the correlation coefficient (r). A significant positive correlation is seen as r advances towards 1, while a significant negative correlation is indicated when r approaches -1. An optimistic NFP reading should force gold to move down and indicate a negative connection, as gold is defined as XAU/USD.

Outcomes

In the preceding 35 releases, there were 11 negative and 24 positive NFP surprises (data for March 2021 and March 2023 excluded). The variance was, on average, 1.46 for good numbers and -0.84 for poor prints. If the NFP reading was below market expectations, gold increased by $8.1 on average fifteen minutes following the publication. On the other hand, favorable shocks caused gold to fall by $5.53 on average. This result implies that a weaker-than-expected report will likely have a more significant immediate impact on investors.

For the periods shown above, the correlation coefficients we computed are not near enough to -1 to be considered significant. Fifteen minutes after the discharge, the highest negative association is observed, with an approximate r of -0.57. After the release, an hour and four hours later, r increases to -0.52 and -0.53, respectively.

There may be several reasons why gold’s inverse relationship with NFP surprises is marginally weaker. After the initial reaction, gold reversed course a few hours after the NFP release on Friday as investors may have looked to book their profits towards the London fix.

More significantly, the labor force participation rate and average hourly earnings—two indicators of pay inflation—may be influencing the market’s response to the employment report’s underlying information. The headline NFP print, these additional statistics, and the US Federal Reserve’s (Fed) continued data-dependent approach may influence market pricing of the Fed’s upcoming policy move.