The gold market is seeing some heavy selling pressure in early trade this morning following the release of the latest employment situation data.
The U.S. Department of Labor this morning reported the country added 215,000 jobs last month which was in line with consensus estimates. This report is likely the most important economic report of the month and comes at a time when debate is ongoing about the timing and pace of further interest rate hikes by the Federal Reserve.
This morning’s strong showing will likely stoke the notion of a June rate hike, and some markets are acting accordingly in early trade. Stocks are moderately lower as is crude oil while the dollar index moves higher.
The dollar index has been on the defensive recently as ongoing uncertainty about further interest rate hikes took a toll. Today’s strong jobs report could potentially drive more buying in the dollar which in turn could potentially weigh on commodity prices.
The weakness seen in the dollar index over the last several weeks has likely been a big driver for gold, silver, crude oil and other commodities. While the dollar is seeing a bounce today following the non-farm payrolls data, the greenback remains in a form downtrend and could potentially see any rallies faded.
A stronger dollar could potentially have a significant impact on the gold market and could potentially keep the current rally at bay.
The gold market has been showing some signs of a potential top and today’s price action will certainly add to increasing bearish sentiment. The market appears to be in the process of making a rounded top and a test of the psychologically important $1200 per ounce level appears to be in store.
While this level may be bought by the gold bulls, a break below could drive more longs out of the market and reignite selling pressure. Failure to maintain the upside breakout seen in gold could potentially see prices retest the lows again or carve out new lows before finding more solid footing once again.
Although stocks are lower today, overall risk appetite has remained on the high side as equities have marched back towards previous highs. The lack of any fresh, bearish
news out of China has also likely fueled risk appetite and detracted from safe haven interest in gold. While this can change quickly, the notion of higher interest rates, a stronger dollar and good appetite for risk will likely weigh on gold in the near-term.
