As the month draws to a close, gold prices are plummeting, leaving investors wracked with anxiety. The past four months have seen a steady decline in gold prices, and if it closes below last month’s figure of 1965, it will only deepen the worries of concerned investors. Over the last two trading days, investors have been closely monitoring the gold market, desperately hoping for a reversal of its freefall. However, all signs point to even greater losses on the horizon.
Context
This month has been particularly brutal for gold prices, with the value continuously dropping. The month’s low stands at 1884, slightly lower than the previous month’s low of 1902.
Gold has suffered especially against the dominant US dollar, which has gained considerable momentum as investors assess the Federal Reserve’s next policy moves and attempt to gauge the health of the US economy. Traditionally, investors turn to gold assets during uncertain times, so the recent decline has triggered concerns about the overall state of the economy.
Crucial Data
Investors entered this week with their sights trained on several key economic events that could significantly impact gold prices. The release of two important economic readings today had investors on edge. The expectation for the US consumer confidence index was a reading of 116, slightly lower than the previous month’s 117. Unfortunately, the actual number came in much softer than anticipated, registering at 106. This disappointing result caused widespread panic among investors, foreshadowing a potential slowdown in consumer spending that could have dire consequences for the economy. In response, the price of gold experienced a temporary surge as investors flocked to the safe haven to protect their funds.
Another influential event affecting gold prices was the release of the US JOLTS job opening data. Analysts had expected a slight improvement with a forecast of 9.49 million, edging up from the previous 9.17 million. Shockingly, the actual number printed at 8.83 million. This revelation sent shockwaves through the markets, reigniting the discussion of whether the economy is heading towards a soft or hard landing.
The number unequivocally points to heightened unemployment levels. Today’s US ADP data provided further evidence, delivering a reading that fell well below market expectations. Against the forecast of 194K, the ADP number only reached 177K. The ADP figure typically sets the tone for the most crucial economic reading in the US, the NFP (Non-Farm Payrolls).
Looking ahead, investors will be scrutinizing Friday’s NFP figures closely. This data release will shed more light on the health of the US economy and the progress of its recovery. If the figures fall short of expectations, with a forecast of 169K compared to the previous 187K, investors may flock to safe havens like gold, driving the price up.
When it comes to trading gold, several factors come into play. However, from a technical standpoint, there is a clear indication of significant support near the 1884 price level. Today’s data brought some good news for bullish investors, resulting in a surge in prices as the dollar index nosedived and investors speculated that the Fed would take minimal further action. The primary immediate resistance to watch for this week sits at around 1984, just above this month’s high of 1965. If Friday’s economic figures show improvement, we may witness a retest of the aforementioned support levels at 1884.
Nevertheless, if the narrative shifts to anticipate a reduced likelihood of a Fed interest rate hike, weakening the dollar index, gold prices could soar towards the resistance levels at 1965 and 1984.