The gold market is being sold off Friday after the non-farm payrolls data beat expectations. The non-farm payrolls data for May showed a rise of 390,000 jobs with estimates looking for a rise of 328,000. The unemployment rate did not dip, however, and stood at 3.6%. Average hourly earnings also rose by 5.24% annually. The gold market did not show much of a knee-jerk reaction to the figures, but has since grown increasingly weaker throughout the session. The better-than-expected data is a win for the hawkish policy camp as it may allow the Fed to continue raising rates without any worries.
The jobs data did not do much for the stock markets, either. Stocks are solidly lower at mid-day and could be headed for a rough close to cap off the trading week. The selling being seen in equity markets today is nothing new. The market may simply be gearing up to resume its downtrend and weakness after a solid showing last week. Such is often the case in a bear market and the ride is likely to continue.
Although gold held the $1860 level for much of the session, it eventually succumbed to bearish pressure and slid even lower. Spot prices are now below the $1850 level in what could prove to be a key technical pivot. The $1850 area has been a battleground for weeks now, and prices sinking back below this area may encourage more sellers to sell or get short. A deteriorating technical picture for gold may not do the market any favors as the metal is seemingly already lacking any fresh bullish inputs. In the absence of new bullish influences, the market may remain vulnerable to additional selling pressure that could see it test the $1800 level in a short period of time. If the market does produce a close below that level, look out below. If the bulls are able to hold prices above it, however, it could be viewed as being constructive and a great long-term buying opportunity.
The bears are maintaining control of gold on the daily chart. That control had com3 under fire recently, however, as the bulls rallied prices back above the $1850 level. That upside negated a 2.5-month downtrend on the daily chart. Whether the trend lower continues or not, the bulls do have their work cut out for them. The bulls need to produce a close above the $1900 level to gain momentum. Additional buyers are unlikely to enter the market unless gold breaks out above this level and the lack of fresh buyers may severely limit any possible rallies in the meantime.
Rising yields, dollar strength and an aggressive Fed may all act as barriers to higher gold in the months ahead. Despite these factors, however, the bulls do have reasons to buy gold and may continue to do so. Given U.S. debt levels, the geopolitical scene and the potential for a recession, gold may be unlikely to decline much further.