Posted on January 10, 2015
Gold prices are holding gains this morning following the release of the non-farm payrolls data for December. According to the U.S. Department of Labor, the country added 252,000 jobs while the unemployment rate dipped slightly to 5.6 percent. While some have already characterized this report as “Amazing,” there were some components of the data that disappointed. Hours and wages were a disappointment, and overall “mixed” might be a better description of the report.
Stocks are slightly higher following the report while crude oil prices are a tad lower and the dollar index is slightly higher. Gains in gold being seen thus far appear limited, however, as the report was not characterized as a “miss” and investors stay hungry for stocks.
Speaking of stocks, the stock market has shown a great deal of resiliency in recent days. After starting the new year off on the wrong foot as the SP500 dropped around 100 points from its recent highs, stocks have rallied sharply the last two days with the SP gaining back around 60 points of lost ground. Of note is the fact that stocks did not get as low as the swing lows reached in December. It would seem that demand for stocks remains quite strong, and that another run at new highs is a distinct possibility. Should this prove to be the case, gains in gold and the precious metals complex may be somewhat limited. On the other hand, should stocks begin to falter again, it could give investors more reason to reallocate assets and gold could stand to benefit.
The rally in stocks this week may be due to some signs of stabilization in the crude oil market. Oil prices broke the $50 per barrel level this week, but have since shown some signs of selling fatigue. Should oil begin to fall apart further, however, stocks could once again come under pressure.
Gold prices are still trending higher from the lows reached in November, although appear to be still somewhat lacking in buying interest. Gold has not been able to put together an impressive multi-day rally as of yet, and the market remains vulnerable to selling pressure. This week’s high around $1223 is near-term resistance while the $1240 area will also offer resistance. A move above the $1240 area could attract additional fresh buying interest in the market and would turn the intermediate trend to a more neutral status.
While the new year is just getting under way, stocks have exhibited a good degree of volatility and there could potentially be more in store. The gold bulls may be simply biding their time until more stock weakness sets in before attempting a larger rally in prices.