Posted on September 05, 2014
Gold prices are slightly positive this morning following the release of the U.S. Department of Labor’s employment report for the month of August. According to the report, the U.S. added 142,000 jobs in August while the unemployment rate dipped down to 6.1 percent. Consensus estimates were looking for an increase of 230,000 jobs and an unemployment rate of 6.1 percent. Clearly, the amount of jobs added in August is disappointing. Some analysts have noted, however, that the jobs data for August will quite possibly be revised.
Stocks, which were trading moderately lower prior to the NFP release, have cut their losses but are still trading slightly lower today. The SP500 is still hanging around the 2000 level and has yet to either decisively break down or start another run higher. Perhaps the market needs to do some back and fill trade before a potential upside move is extended.
The gold market has seen very bearish price action this week. After beginning the week trading around the $1290 level, the gold market broke down on Tuesday and saw some decent downside with gold prices falling to the $1263ish level. The gold market staged a bit of a relief rally yesterday nearly touching the $1280 level, but thus far today the market is not showing any real signs of strength. It would seem that from a charting standpoint the gold market may test the $1240 level in the coming sessions. If $1240 does not hold, then the gold bears will likely try to retest the $1200 once again. This level has been tested twice in the previous year or so and has held both times. A third time down may prove to be too much for the gold bulls and prices could potentially start a new, significant leg lower. In fact, the $1000 level could be a possibility if gold cannot hold $1200.
Not much has changed from a fundamental standpoint in recent weeks. Perhaps the biggest factor affecting gold right now in addition to stock strength is the upside dollar breakout. The fact that the ECB just cut rates and is adding stimulus measures in order to try and combat deflation is only going to potentially fuel more upside in the greenback. In addition, the notion of higher interest rates here in the U.S. is likely adding fuel to the fire. Gold simply seems to be lacking any real bullish catalyst right now. Gold has not been able to rally in light of all the current geopolitical tensions, and one has to wonder what it might take for gold to catch a bid at this point.