The yellow metal is not only holding firmly above the $1800 level but is now adding additional momentum. Gold prices are sharply higher in early am trade as the jobs data for April was grossly disappointing.
The U.S. reported that the nation added just 266,000 jobs for April, with the unemployment rate at 6.1%. The jobs added figure is a big miss from consensus estimates which were looking for 1 million jobs added last month. Non-farm payrolls for March were also revised lower from a previous reading of 916,000 to 770,000. The April unemployment rate ticked slightly higher from 6 to 6.1%.
The huge miss in April jobs data should effectively quell the notion that the Fed may have to hike rates sooner than anticipated. The employment data instead paves the way for the Fed to keep its foot on the gas pedal.
The idea of ultra-low rates and QE staying in place for some time to come should have a bullish effect on gold and certainly appears to be showing that effect on Friday. The combination of weaker economic data, lower treasury yields and rising inflationary measures could all fuel further upside in gold. The market may, in fact, pose a challenge to recent all-time highs in the weeks ahead. The metal could even move well beyond that level into fresh all-time high territory.
The gold market does have some obstacles in its path that it will need to overcome. Economic strength may become an increasingly important barrier to higher gold as the weeks go by. Competition from alternative asset classes, such as crypto, may also become increasingly measurable. Despite these issues, however, the gold market stands to benefit from the combination of factors that have driven it higher in recent months. Dollar weakness, inflation, easy money policies and more are all bullish factors for gold that could send prices sharply higher from recent levels. Good things come to those who wait, and that saying may never be more true than it is concerning the gold market.
Today’s follow through price action would seem to confirm yesterday’s rally in gold and could attract further buying interest. The real test, however, is likely to come in the $1850-$1870 area. This area marks not only previous resistance, but also the market’s 200-day moving average. Some attempted selling may be expected, but the bulls may simply punch through this region like a knife through warm butter. If that is the case, more buyers are likely to flock to the market as resistance is cleared, setting the stage for additional upside gains. The bulls this week have regained control of gold on the daily chart, and the market may again be viewed as a buy the dips asset until proven otherwise.
Even long time gold detractor Warren Buffet has suggested that gold may be a worthwhile investment in the current environment. Buffet purchased shares of Barrick gold last summer and sold them in the fourth quarter. He was also recently quoted discussing inflation and the effects it is having on his companies and investments.