Thursday, November 01, 2012

How does the Non-Farm Payrolls report (NFP) correlate with gold?

Traditionally, the US dollar is inversely correlated to gold. This means that when the US dollar strengthens gold weakens and when the US dollar weakens gold strengthens.

The Non-Farm Payrolls report reflects the state of the US job market (excluding the farming industry) and it does impact the US dollar.

If the figures are bad, the US dollar will fall and gold should strengthen. If the figures are good, the US dollar will rise and gold should weaken.

However, be aware that the Non-Farm Payrolls report is the most traded news in the world and it is well-known for its high volatility especially in the first hour of the news release.

Ensure your trading system/strategy is able to handle such volatility and risk before you trade the Non-Farm Payrolls.

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