Gold Lower As Outside Markets Weigh
The gold market is solidly lower in mid-afternoon trade on Tuesday. Amid the lack of fresh market inputs, investors are focusing their attention today on the key outside markets. Unfortunately for the bulls, all of these markets are in a bearish posture for gold today. The dollar is higher, crude oil is weaker and treasury yields are also higher. The benchmark ten-year note yield surpassed the key 4% level in today’s action and could see an ongoing run higher.
As the key outside markets fail to cooperate today, investors will also turn their attention to potentially major market factors. The Federal Reserve and its plans for interest rates have to be at the top of the list. Although the Fed has recently signaled it may now take a wait-and-see approach before hiking rates any further, stronger-than-expected data may keep the Fed moving the needle higher. Rates are having a bearish effect on inflation, which is good, although price pressures remain stubbornly above the Fed’s desired target of 2% annually. The markets are now awaiting the key data point of the week which is Friday’s non-farm payrolls figures for July.
The jobs data at the end of the week is expected to show a gain of 200,000 jobs. This would be a slight dip from the 209,000 jobs gained in the report for June. Should the figure come out in line with expectations, it is unlikely to sway any minds about the Fed’s plans. Should the figure see a large miss or beat, however, markets may take notice and get on the move as expectations for further rate hikes mount. A growing expectation of further action from the Fed could hurt gold, stocks, and other markets. The threat of an ongoing hawkish Fed may be enough to prevent gold from surpassing the $2,000 per ounce level. A failure to overtake this level, and soon, may give the bears the signal to move in and take over. This could, therefore, cause a reversal in gold’s fortune and could even reverse the metal’s trend from higher to lower.
The slight technical advantage that the gold bulls had is no longer present. The metal is on even fitting right now, and today’s sell-off may even give the bears the ammunition they need to drive prices lower. If the bears can test the $1,900 level in the weeks ahead, a major technical reversal could be seen. A failure by market bulls to maintain trade above $1,900 could lead to an even larger decline in the market that could see prices as low as $1,800 per ounce before finding more solid footing. A reversal higher from this level, on the other hand, could be indicative of a market that has underlying strength and could quickly rebound back near the $2,000 level. The next few weeks, as summer winds down, may prove to be boring and present little opportunity for the bulls or bears if prices move mostly sideways.