By Barani Krishnan

Investing.com – Two steps forward and one behind — gold’s measured dance on its return to $1,800 pricing continued this week as it survived the onslaught of a powerful U.S. jobs report for January, although it could not advance strongly enough to excite longs in the market.

Gold futures’ most active contract on New York’s Comex, , settled up $3.70, or 0.2%, at $1,807.80 an ounce. For the week, it rose 1.3%.

While a weekly gain north of 1% isn’t bad for any market, in gold’s case it’s a painful reminder to bulls in the market of how underplayed the commodity is as an inflation hedge, when key price indicators in the U.S. are all pointing at 40-year highs.

“The $1,800 level is key for gold and if gold can continue to hover around it, that would be very positive for bullion bulls,” Ed Moya, analyst at online trading platform OANDA, wrote in his weekly commentary.

“If gold breaks below $1,780, conditions could get treacherous and prices could see significant momentum-selling targets towards $1,700.”

Gold longs briefly had a panic moment on Friday morning when gold broke below that $1,800 level, although it never really got far — reaching a session bottom of $1,792.20. Given the circumstances of the jobs report, that was actually pretty impressive on gold’s part.

US employers added 467,000 jobs in January, beating economists’ expectations, although the jobless rate moved up fractionally to 4% from a previous 3.9%, the Labor Department said in its non-farm payrolls report. Economists tracked by Investing.com had forecast a jobs growth of around 150,000 for last month versus December’s 199,000.

Following the jobs report, fed funds futures suggested there could be as many as five interest rate hikes this year as the extraordinary labor market conditions create a solid base for the Federal Reserve to fight inflation.

“The US jobs report has the market now pricing in a greater than 50% chance that the Fed will hike five times in 2022,” economist Greg Michalowski said in a post on the ForexLive financial media platform. “Expectations for March and May hike are now at 100%. There is an 82% chance of a June hike and a 56% chance of a July and November hike.”

The quantum for each hike remains at 25 basis points. Rates are currently at between zero and 0.25%, and the five hikes could bring them to a range of 1.25-1.50% although some hikes could be more than 25 basis points, depending on the performance of the labor market, the economy and, ultimately, inflation.

After staggering unemployment triggered by the Covid-19 outbreak in 2020, the labor market has picked up dynamically, showing a jobless rate of just 4.0% in the January non-farm payrolls report released on Friday — versus a record high of 14.8% in April 2020. An unemployment rate of 4.0% or lower is considered as “maximum employment” by the Fed, which has a dual mandate of growing jobs and keeping inflation under control primarily through interest rate controls.

Since slashing rates to nearly zero in March 2020, the Fed has provided stimulus of more than $2 trillion over the past 20 months to sustain credit markets. On top of that, the federal government spent trillions of dollars more on pandemic relief measures, while employers paid out higher wages to working Americans.

All that money, along with supply chain bottlenecks arising from the pandemic, have created soaring inflation as the economy grew 5.8% last year from a 3.5% contraction in 2020. The US Consumer Price Index, a key barometer for inflation, jumped 7% in the year to December, growing at its fastest since 1982. The Fed’s own tolerance for inflation is a mere 2% a year.