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Gold Prices May Resume Decline on US Jobs Report

Gold Prices May Resume Decline on US Jobs Report

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices rise for a second day, move still looks corrective
  • Upbeat US jobs data may revive selloff as Fed outlook firms
  • Crude oil prices down with stocks on emerging market woes

Gold prices managed a second day of corrective gains after Tuesday’s selloff. The lion’s share of intraday gains evaporated as renewed risk aversion buoyed the US Dollar however, sapping the appeal of the perennially anti-fiat yellow metal.

Risk aversion sank crude oil prices however. Investors’ mood soured amid continued worries about instability in emerging market assets as Fed tightening drives funding stress. MSCI gauges tracking shares and currencies in the sector tellingly plunged in tandem.

UPBEAT US JOBS DATA MAY HURT COMMODITY PRICES

Looking ahead, US labor market statistics are in focus. A pickup in job creation is expected, with the economy adding 191k jobs in August after a 157k increase in the prior month. The jobless rate is seen falling to 3.8 percent, revisiting an 18-year low.

Wage inflation might dominate the spotlight however. Leading PMI surveys point to shortages of suitable candidates to fill vacancies across the nonfarm sector, coupled with the follow-on rise in labor costs. If that translates into an unexpected pickup in average hourly earnings growth, Fed rate hike bets may swell.

The US Dollar is likely to rise in this scenario, compounding pressure on gold prices. Crude oil prices may likewise decline as the stronger greenback amounts to a de-facto headwind for assets priced in terms of the benchmark currency on global markets.

Learn what other traders’ gold buy/sell decisions say about the price trend!

GOLD TECHNICAL ANALYSIS

Gold prices continue to digest losses after breaking counter-trend support to hint the dominant downtrend has resumed. A daily close below theAugust 24 lowat 1183.28 opens the door for a retest of the swing bottom at 1160.37. Alternatively, a move back above the August 28 high at 1214.30 exposes the 1235.24-41.64 area anew.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices dropped to challenge support guiding the uptrend since early February. A daily close below its lower boundary – now at 65.25 – sees the next downside barrier at 61.84. Resistance remains in the 70.15-41 area, with a reversal above that targeting the inflection point at 72.88.

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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

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