Gold prices are moving lower in the aftermath of the non-farm payrolls data for November. The U.S. Department of Labor reported an increase of 321,000 jobs with the unemployment rate steady at 5.8 percent. The increase in jobs was the biggest since 2012 and showed hiring across all industries. In addition, new jobs were revised higher by a total of 44,000 for the previous two months.
The jobs report is driving the U.S. dollar index higher. The greenback is at multi-year highs and is thus far not showing any signs of slowing down. It appears that although the ECB did not take any action yesterday the writing for further stimulus is on the wall. The dollar may continue to work higher and thus may prove to act as resistance to significantly higher gold prices.
Stocks are higher off the news but not in dramatic fashion. The trading session has a lot of day to go and there is always the possibility of “Buy the rumor sell the fact” type of trade entering the market. Stocks do, however, appear to be intent on climbing higher into new highs through year’s end. It is unlikely that gold and the precious metals complex is able to put together a large, sustainable rally in spite of equity strength.
Gold has been trending higher in the last couple weeks, although the bulls have thus far not been able to take prices sharply higher. In fact, the market continues to struggle to hold the $1200 area on the chart. Monday’s high in the $1220 area remains near-term resistance. A move above this level could potentially set the stage for further upside as additional fresh buying interest may enter the market. If the gold market stagnates here and is unable to press forward, there is considerable risk of another test of the recent lows. A break below those lows in the $1140 area could possibly set the stage for gold heading down to the $1000 level.
The first of the year could potentially bring about some changes, however. One has to wonder how much longer stock investors will remain aggressive in a market that is arguably overbought at this point. There are some additional signs of the market being “Frothy” at this point as well that could possibly cause investors to begin to reallocate some assets in the first part of the new year.
Demand for gold and silver at current levels has remained steady and it seems that buyers feel that current price levels represent a good value. That being said, however, the gold market has a number of large hurdles in its way that may make a large rally difficult at this point in time.
