All in all this week was pretty uneventful for the gold market. This is somewhat surprising given the fact that the markets had to digest the FOMC rate decision, the European central bank rate decision, and today’s April non-farm payrolls report. The FOMC proved to be a non event for the gold market. The fed is holding the line on interest rates for now which was completely expected.
The Fed did however, make some language changes. The Fed discussed being flexible with its bond buying program and indicated that it could increase or decrease its bond purchases at any time. In other words-no one really has any more of an idea about the fed removing the punchbowl as they did before the meeting.
The ECB did cut rates on Thursday as expected. This cut sent the Euro currency sharply lower and thus the dollar rallied. It seems clear that the ECB has to be aggressive in fighting the slow down that the region is currently going though. The question that many people are asking now is if there were be additional cuts down the road by the ECB. We’ll have to wait an see. This policy decision also did not seem to faze the gold market to a large degree.
Friday’s non-farm payrolls report showed the U.S. added 165,000 jobs in April while the unemployment rate dipped to 7.5%. Not only were these numbers better than expected, but revisions to March numbers also gave investors the reason to buy risk assets. The SP500 is up about 20 points today and has exceeded the 1600 level while the dow briefly traded above the 15,000 level. Crude oil joined in the celebration as well trading up almost $2.00 per barrel today. “Risk-On” remains the market’s mantra.
Following the release of the report this morning gold was immediately sold off but recovered quickly to go back into positive territory for a short time. The yellow metal was not able to hold the gains however, and gold prices drifted back into the red mid-morning and have not looked back. Profit taking along with some flattening ahead of the weekend and after the big jobs number likely contributed to gold’s lackluster performance today.
Gold prices continue to consolidate following the recent sell-off. Gold continues to trade around the $1471 resistance area and thus far has not been able to punch through. Gold prices failed to maintain trade above the 20 day EMA today which is slightly alarming. The current price level which is the approximate 62% retracement level of the down move is key. If gold cannot break away here to the upside soon, then sellers are likely to again take control of the market and send prices lower for a possible re-test of the April lows.
