Posted on May 02, 2014
Gold prices are having a tough time making up their mind here this morning following the release of the non-farm payrolls data for April. The U.S. Department of Labor reported an increase in jobs of 288,000 and a down tick in the unemployment rate to 6.3%. This data beat expectations by a very wide margin-in fact it wasn’t even close. Consensus estimates were looking for an increase of around 215,000 jobs and a slight down tick in the unemployment rate to 6.6%. In addition to the better than expected data for April, March numbers were revised higher as well.
The non-farm data is not considered to be good for the precious metals bulls. In fact, stocks are moving higher again as well as interest rates, and the gold bulls seem a little bit hard-pressed to come up with some type of bullish sentiment. The dollar index is also rallying off the data, and is approaching the important $80 level once again. Further strength in the greenback may also fan the bearish flames in bullion.
It would seem that the strength in stocks and risk assets continues to detract from any potential interest in gold or silver. This could potentially remain to be the case until such a time that stocks begin to falter. The economic data coming out has seen some rough patches in recent months, but all in all seems to be continuing to point towards economic recovery. The Fed will likely stay the course on its current policy, and continue to remove stimulus. This may be considered a bearish factor for gold.
The situation in Ukraine is once again garnering more attention which could potentially help keep a floor under gold prices. The Ukraine military is conducting a military operation aimed at pro-Russian separatists, and gunfire has been reported. While this situation has remained somewhat on the back burner recently, it could potentially escalate very quickly and the potential for more widespread violence is unfortunately very real. Markets have thus far been able to essentially brush off escalation fears-although one has to wonder just how much markets will be willing to tolerate before entering a risk-off mode.
Gold continues to hold support in the $1280 area but has thus far not been able to distance itself from this level. The longer gold hangs around this level, the greater the likelihood of a meaningful downside breach. Additional support may be seen around last week’s lows in the $1268 area, however, it seems that with more selling pressure the $1240 area could potentially be in the cards in short order.