Commerzbank say the NFP report could be the "final confirmation" for taper

Germany (Oct 8)  Commerzbank's Carsten Fritsch has commented on the current situation in the gold market. He noted that the fact that gold didn't drop in the face of rising yields and an appreciating greenback was "no small achievement".

He said, "One reason could be that the higher yields, which have now reached 1.6% in the case of ten-year US Treasuries – putting them at a four-month high – was more or less offset by an increase in inflation expectations, meaning that real yields changed hardly at all."

Delving deeper into inflation he added, "Market-based inflation expectations on the basis of break-even inflation have now reached just shy of 2.5%, their highest level in nearly five months. It appears that more and more market participants doubt that inflation will drop back to the Fed’s 2% target anytime soon. It is only logical therefore that the US Federal Reserve will want to exit from its ultra-loose monetary policy and will soon begin scaling back its bond purchases"

Lastly in the report, Fritsch spoke about the upcoming NFP report. He noted "this afternoon’s US labour market report is likely to supply final confirmation of this, even if it does not turn out to be outstanding. After all, Fed Chair Powell did not set the bar for the bank’s tapering decision particularly high at the press conference after the Fed’s latest meeting. In his words, it wouldn't take a knockout great super strong employment report to justify this, but just a reasonably good one. This should no longer weigh significantly on the gold price because the decision about the start of tapering will very probably be taken at the next Fed meeting and should not come as a surprise to anyone. Markets expect the first rate hike in the fourth quarter of 2022, i.e. not for a good year yet."

The analyst consensus sits at 500k with a 400K low and 1000K high. Deutsche Bank are on the low side saying “We are forecasting a pickup in September, with NFP growing by 400K, and the unemployment rate ticking down to a post-pandemic low of 5.1%. Remember in the weak report last month, yields rose on the day as markets focused on the wage increases rather than the poor headline number.”

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