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Gold Prices Challenge Chart Support as US Jobs Data Enters Spotlight

Gold Prices Challenge Chart Support as US Jobs Data Enters Spotlight

Ilya Spivak, Head Strategist, APAC

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices probing chart support below $1700/oz figure
  • Crude oil prices edging toward resistance below $44/bbl
  • May’s US jobs data may top forecasts for improvement

Gold prices tiptoed higher yesterday, retracing a bit of the prior session’s selloff. The move seemed corrective, echoing a consolidative tone on the broad-based sentiment front. This was telegraphed by standstill on the benchmark S&P 500 stock index. Divergence between the US Dollar and Treasury bond yields – which typically serve as proxies for the yellow metal’s main driving themes – told a similar story. Crude oil price action was likewise uninspired.

The spotlight now turns to May’s US employment report. It is expected to show a 7.5 million drawdown in nonfarm payrolls, a dismal print telegraphing ongoing disruption from the Covid-19 outbreak. Nevertheless, such an outcome would mark improvement from the 20.5 million plunge in April. The jobless rate is seen rising to an eye-watering 19.1 percent, the highest since the Great Depression of the 1930s.

US economic news-flow has impressively recovered relative to baseline forecasts since late April, suggesting that analysts’ models have become overly pessimistic and opening the door for upside surprises. Such a result is likely to stoke building optimism about the economy’s ability to rebound from coronavirus malaise as global lockdown measures continue to be eased.

The implications of such an outcome for gold prices are somewhat clouded. On one hand, a positive print may limit scope for Fed stimulus expansion in the minds of investors, pushing up bold yields and weighing against the non-interest-bearing metal. On the other, ebbing haven demand may see the US Dollar lose more ground, complimenting gold’s credentials as an anti-fiat alternative. The response from crude oil may be more straight-forward: the cyclical commodity is likely to rise if the data tops forecasts and fall if it disappoints.

GOLD TECHNICAL ANALYSIS

Gold prices continue to hover at a range floor in the 1679.81-93.92 area, with negative RSI divergence warning that a top may be taking shape. A daily close below support initially exposes the 38.2% Fibonacci retracement at 1645.40. Near-term resistance remains at 1765.30, the May 18 high.

Gold price chart - daily

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to edge higher toward resistance in the 42.40-43.88 area, with a daily close above that exposing the underside of former range support near the $50/bbl figure. Alternatively, a reversal back below 34.78 – now recast as support – appears to initially target the 27.40-29.11 inflection zone.

Crude oil price chart - daily

Crude oil price chart created using TradingView

COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Head APAC Strategist for DailyFX

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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