After working lower the last couple sessions, gold is getting a nice bounce today going into the weekend. The gold market continues to have two areas of focus. Obviously, the situation regarding Syria is critical and will be closely monitored by investors. Secondly, investors continue to watch the data stream as talk of a September taper by the Fed still dominates headlines.
Earlier this morning, markets got the latest release of the U.S. Department of Labor’s monthly non-farm payrolls report for August. The U.S. added 169,000 jobs which was below consensus estimates for an addition of 175,000 jobs. The unemployment rate ticked down to 7.3%. Given how recent data has been upbeat and beating expectations , this report is a disappointment.
To add insult to injury, there were downside revisions to non-farm payrolls numbers for June and July. Although stocks were higher earlier in the session, erratic trade has seen the equities sell off. Gold prices have worked higher on the disappointing data while the U.S. dollar index has weakened substantially. Oil prices are higher today going into the weekend as buyers wanna be long crude in the event of any action taken against Syria. Higher oil prices are also likely contributing to gold’s upside today.
As we have discussed previously, many were looking to today’s jobs report as possibly being the determining factor on whether a taper is seen in September or not. Although the number was below expectations, we do not feel that it was much of a game changer or factor either way. In fact, most economists still agree that the Fed tapering at its next meeting is quite likely. In the absence of any military action in Syria, data will continue to drive markets.
For now, the uptrend in gold prices from the June lows remains intact. In fact, gold prices bounced off of a trend line in overnight action when they hit the $1363 ish level. The fact that the market is bouncing this strongly from that trend line is a bullish sign. In addition, volume was heaviest on the test of this level which also coincided with the non-farm payrolls release. Heavier volume would seem to us to indicate larger buyers stepping into the market at those lower price levels. This is another bullish sign for gold prices.
Barring closing price action under the $1360 level, we still feel gold is poised to test its 200 day EMA around the $1465 level with a continuation of the current uptrend. We feel this scenario is likely with or without Fed tapering in the current environment of rising interest rates and geopolitical risk.
