Posted on June 07, 2013
Gold is being sold off today following the release of the U.S. Department of Labor’s monthly non-farm payrolls data for May. It has been reported that the U.S. added 175,000 jobs last month while the unemployment rate ticked up to 7.6%. In addition, the amount of jobs added for April was revised lower. While the amount of jobs added last month exceeded expectations, the uptick in the unemployment rate was a surprise. This uptick however, was likely simply due to the fact that more people are out looking for work again.
This report is what we think many would consider “lackluster.” Yes-the U.S. economy is continuing to grow but let’s just say at a very modest pace. The question now becomes will this data have any direct impact on the Fed’s timing to begin tapering its bond buying operations. There is no easy answer to this question but given the nature of this report-basically in line with expectations and nothing too extraordinary, it is quite likely that the debate rages on as to when the fed will begin to scale back and by how much.
As of this moment, gold prices are falling while the U.S.dollar index is trading moderately higher. Stocks are continuing their rally from yesterday as well. Judging by the reaction in gold however, it seems that gold investors see the writing on the wall. It is only a matter of time before the fed does remove the punchbowl. One would think that this will allow the U.S. dollar index to once again start moving higher. Stocks seem to be in a position where good news is good and bad news is good. Although we have seen stocks correcting a bit in recent days, it is unlikely that we see a much larger scale pull back. Should the equities markets remain strong, this will also work against gold.
From a technical perspective, gold prices have as of now lost the $1400 level again. In fact, gold simply has not been able to maintain any solid price action above this level and some key moving averages. The bulls were taking price slightly higher in recent sessions, but it appears that this jobs data may be the catalyst for more downside. Now that gold has broken back below the $1400 level and has made a lower low since its last swing low in price, it appears that the selling pressure is mounting. This could very well now set the stage for a new low in price if the April lows are taken out to the downside.