Gold’s downward spiral could push prices down an additional $ 100 – analysts

(Kitco News) After losing $ 50 on Friday following an excellent US jobs report, gold could lose another $ 100 before rebounding, analysts say.

The jobs report surprised the markets with 943,000 jobs added in July against the 870,000 expected. In addition, the unemployment rate fell to 5.4%.

“This number of jobs is bullish for the US dollar and pushing rates higher, which has the opposite reaction for gold,” RJO Futures senior commodity broker Daniel Pavilonis told Kitco News.

For now, the game could be over for gold, Pavilonis said, adding that a strong jobs report means Federal Reserve Chairman Jerome Powell could start hinting at a decrease as soon as possible. at the end of August.

“The US dollar index has a shot at 95. For gold, that could mean we are coming back to $ 1,673. Gold will likely spend more time on this downside. Right now, we could witness to more liquidations, ”Pavilonis said. “The jobs report tells us wages are going up. The unemployment rate is going down, people are looking for jobs. If some of the social benefits disappear in September, the situation will improve even more.”

A critical level for gold to hold is $ 1,754 an ounce, said Kevin Grady, president of Phoenix Futures and Options LLC. “We should see a rebound from these levels,” he said. “But I think gold doesn’t trade well. Gold had fertile ground to explode. And it couldn’t go over $ 2,000 and hold it.”

This is likely a temporary pullback for gold, but the precious metal could drop below $ 1,730 an ounce on this trend, said the head of global strategy at TD Securities.

Gold is expected to continue to face selling pressure after the payroll data as many in the market will think the Fed has the right environment to start declining in early December 22 or even December 2021. “This means nominal and real yields are moving all the way up the curve. Higher than post-ADP lows,” Melek said.

Melek, however, is not giving up on gold, stating that the Delta variant poses an upside risk to the precious metal. “An outright rout of gold is unlikely at this time. There are still some negative points coming from the Delta variant. The TDS tactical target is $ 1,730 / oz.”

After Friday’s liquidation, gold is currently in a danger zone, said Edward Moya, senior market analyst at OANDA. “Gold may find some support from the $ 1,750 level, but if that breaks, prices could drop to the psychological level of $ 1,700,” Moya said.

Longer term, gold should find more support as inflation remains above the Fed’s target and the central bank’s lax monetary policy is maintained, Melek added.

“Real yields will be negative for a long time. The market will believe that the Fed is quite willing to maintain accommodative conditions for a long time once things normalize as well. Gold will be doing pretty well,” he said. he declared.

Dating in Jackson Hole

The markets will closely follow the Jackson Hole Economic Symposium, which will be held in late August. Analysts believe Fed Chairman Jerome Powell will use the platform as an opportunity to start outlining the central bank’s debt reduction plans.

Powell will most likely use Jackson Hole to lay the groundwork (a mention that ‘substantial progress has been made’ given two strong jobs reports in June and July), which will put September on the line as the FOMC will officially announce the details of the reduction, with actual tapering off from December FOMC / end of year, ”said Nicky Shiels, Metals Strategy Manager, MKS PAMP GROUP.

Over the next week, macroeconomic data will continue to play a dominant role in deterring the direction of gold prices.

Those to pay attention to will be the inflation readings, including Wednesday’s CPI report and Thursday’s PPI report.

“The Federal Reserve’s doves suggest that inflation should not be as targeted as it has been, given that price pressures have been concentrated in relatively few areas such as car prices. opportunity and areas that have felt particular reopening frictions.We are less optimistic and expect price pressures to expand into more areas of the US economy given ongoing supply constraints, including the shortage of skilled workers and robust demand fueled by stimulus, ”said James Knightley, ING’s chief international economist.