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Gold Prices Rejected At July Highs After Stellar NFP

Gold Prices Rejected At July Highs After Stellar NFP

Tyler Yell, CMT, Currency Strategist


Talking Points:

Commodities often play an opposite role to the US Dollar, give that is the base currency from which they’re priced. An oversimplified example is when Gold high $1,920/oz in September 2011 and Oil was ~$114/bbl was near the US Dollar’s nadir.

Friday’s Non-Farm Payroll Print +255k, which exceeded all forecasts by Bloomberg economists. Now, we will look to next week to see if commodity weakness is beginning again, or if the first week of August was a simple one-step back after two steps forward over the past few months.

Where are gold and crude oil prices heading in the second quarter? See our forecasts here !

GOLD TECHNICAL ANALYSIS:As of mid-day Friday, Spot Gold (CFD: XAUUSD) was down ~1.6% or $21.50. Much of the fall was due to the fear of a stronger dollar on the after two very strong Non-Farm Payroll numbers were released for both May & June.

Given today’s ~1.6% drop, the trend higher still seems unperturbed. A trendline drawn off the extreme lows in June looks to be supporting prices, and only a break of $1,312.05 (mid-July low) would change our tone from Bullish to Neutral. The price channel and Ichimoku drawn on the chart below show what outsides of the short-term volatility, prices continue to print higher lows, which are hallmarks of markets not to sell.

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices broke below support at the 200-DMA at $40.38/bbl earlier this week. Since the break, Crude Oil prices have oscillated around this key zone, but the dual-threat of a stronger US Dollar on the back of two very impressive NFPs and fear of oversupply re-emerging seem to imply the path of least resistance is lower.

The zone highlighted on the chart below aligns with the March price correction from $41.87/bbl-$35.22/bbl. If the Bullish Trend from Feb-June is set to resume, a prior correction (like the one highlighted below) is a likely place for a reversal to form. However, because we’re at the top of the zone, buying now could be very risky. As noted yesterday, a break above the 100-DMA ($44.77/bbl) would shift the bias to begin favoring upside again. However, this would likely need to align with renewed US Dollar weakness, which may be hard to obtain.

--- Written by Tyler Yell, CMT. Currency Analyst for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.