(Kitco News) Despite a $20 gain in gold on the back of US jobs data, analysts are cautious, citing macro downsides and dangerous technical levels that could put the metal down next week. stay.
A strong US dollar and rising yields pushed gold below $1,700 an ounce earlier this week.
“Gold is becoming a punching bag as the soaring sovereign bond yields fueled the King Dollar trading. It was bad news for gold everywhere. said OANDA Senior Market. Analyst Edward Moya.
Comex gold for December is expected to close at around $1,727.20 an ounce, down 2.5% on Friday, after gains reflecting the August jobs report.
However, analysts see Friday’s move only as a short covering rally. “The market is trending down. It failed to sustain above $1,800. $1,700 is the bottom. I expect the market to be in a choppy range. ‘Once beyond that, I start to be positive,’ Frank Cholly, senior market strategist at RJO Futures, told Kitco News.
Capital Economics senior U.S. economist Michael Pearce said U.S. nonfarm payrolls rose by 315,000 and the unemployment rate rose to 3.7%, 75 basis points higher than the market expected. He said a 50-basis-point rate hike would be small relative to the rise.
“Data suggest that labor market conditions are beginning to decelerate more significantly, and we expect this to contribute to slower economic growth over the next few years. It’s also contributed to the decline, which is the Fed’s latest hawkishness,” Pierce said Friday.
The dollar retreated according to the data, giving gold room to rally. However, analysts remain very cautious, especially heading into the long weekend.
“These long weekends bring a lot of surprises,” Sean Rusk, co-director of Walsh Trading, told Kitco News. However, uncertainty is still very high and if $1,680 fails to hold, gold could fall.”
US dollar problem: Gold price at risk of $1,600 to $1,500
If the US dollar remains elevated and falls below the $1,680 an ounce level, it will open the door to $1,550 an ounce, Rusk said.
“Given the long-term outlook for the stock market, we will be really cautious here. With stocks crashing and the dollar falling, I don’t know how gold can sustain its rally,” he said. . “If gold’s short-term lows fail to hold and fall to $1,678, gold could retreat to pandemic lows of $1,625 and even $1,484. Gold holds $1,670 to $1,680. You have to, otherwise you will fall… to a lower level.”
For the rusks to become bullish on gold, the precious metal needs to break the $1,800 per ounce resistance level. “Whether gold does it in response to increased physical demand, hedges what stocks are doing, or makes new safe-haven purchases,” he added. So, I’m a little worried here, gold should have risen further in August.”
The $1,695 to $1,700 range is indicative of the long-term value of the market, Chory said. “If the Fed remains very aggressive in raising rates, the market could fall,” he said. “The dollar has received a lot of support on the idea that the Fed will continue to aggressively raise rates.”
Chory warned that the Fed is lagging behind the inflation curve and may overdo the rate hike cycle. “Gold could fall further. The long-term chart shows that $1,700 is a good support level. “If the price falls below $1,695, we fear another $100 decline.”
Rusk added that support for gold could come from geopolitical tensions, especially in Eastern Europe. “Given geopolitical concerns, no one will be coming home short today.”
next week’s data
Tuesday: U.S. ISM non-manufacturing
Wednesday: BoC rate decision
Thursday: Fed Chairman Jerome Powell on ECB Interest Rate Decisions, U.S. Unemployment Insurance Claims
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