Gold price still stuck waiting for nonfarm payrolls

(Kitco News, Thurs. Aug.5th, 2021) – Indecision continues to dominate the gold market as traders have to wait one more day before the release of July ‘s nonfarm payrolls report.

A lot of focus has been put on the U.S. labor market as many analysts and economists see it as a critical factor in the Federal Reserve ‘s monetary policy decision. A strong employment report on Friday could put the U.S. central bank on pace to reduce its monthly bond-purchase program by the end of the year. A disappointing number could delay those tightening plans for the foreseeable future.

The indecision and lack of conviction in the gold market as investors look for more clarity have created some volatility, with prices pretty much going nowhere fast.

The gold market is trading Thursday morning in slightly negative territory. The selling pressure comes after prices tested resistance at the 200-day and 50-day moving averages for the fourth time since mid-July. Gold’s near-term weakness comes as the U.S. dollar trades near a one-week high above 92 points. U.S. bond yields are also pushing higher, with the yield on 10-year notes at 1.20%.

December gold futures last traded at $1,806.10 down 0.%46 on the day. Many analysts have said that gold needs to hold consistent gains above $1,830 an ounce to attract new investor interest and take a run back to $1,900 an ounce.

However, for some analysts, the path of least resistance could be lower.

Ole Hansen, head of commodity strategy at Saxo Bank, said that gold ‘s multiple failed breakouts above $1,830 an ounce raises further risks to the downside, particularly as bond yields rise off last their recent multi-month lows.

“A fourth unsuccessful attempt to crack resistance above $1830 has left gold exposed to a test of support, currently at $1792,” he said. “The risk of a cycle low in yields may add short-term downside risks to gold with the market wondering whether the yellow metal may be resistant to rising yields just like it ignored the recent slump.”

Thomas Westwater, market analyst at DailyFX.com, said that the gold market ‘s falling momentum created a very bearish short-term technical pattern, which could push prices below $1,800 an ounce.

Not only does gold have to face potentially tighter monetary policy from the Federal Reserve, but globally other central banks are laying the groundwork for potentially higher interest rates in the next few years.

Ahead of the North American session, the Bank of England left interest rates and its asset-purchase program unchanged. However, the British central bank was fairly optimistic about future economic growth.

In its monetary policy statement, the central bank committee said “some modest tightening of monetary policy” over the coming period “is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term.”

Some economists said that if the U.K. can get the COVID-19 pandemic under control, the first rate hike could come in the spring of next year.

However, positive for gold in the near-term, the central bank also downplayed the rising inflation threat, saying that higher prices are temporary.

Posted by :

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com