Gold Slumps Amid Improving US Outlook- November Range in Focus
Fundamental Forecast for Gold:Neutral
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- Price & Time: Important Cyclical Pivot Here In Gold
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Gold prices were softer on the week with the precious metal shedding 1.8% to trade at $1230 ahead of the New York close on Friday. It was a volatile week for bullion and despite the sharp swings prices have largely remained range bound amid heavy event risk as investors digested numerous central bank rate decisions and key US economic data which culminated with the non-farm payrolls report on Friday. As we head into the close of 2013 the focus remains on the Federal Reserve and whether recent upbeat US economic data warrants action to begin tapering the accommodative measures in place since the height of the recession, better known as QE.
All eyed were on the US docket late this week as investors look ahead to the FOMC policy meeting later in the month. US 3rd quarter GDP was revised higher on Thursday to an annualized rate of 3.6% Q/Q, topping estimates for a print of 3.1% q/q with a stronger than expected ADP employment report setting the stage for the Friday release of the November non-farm payrolls report. The data did not disappoint with the print topping consensus estimates across the board with a read of 203K as unemployment fell to 7.0% from 7.3%, beating expectations for just a 0.1% decline to 7.2%.
It’s worth noting that the larger-than-anticipated decline in the headline unemployment rate may be in part attributed to the return of furloughed workers. Still, the broader tone of the data was strong all around with the participation rate, which fell to its lowest reading in more than 30years at 62.8% last month, increased to 63.0% as the civilian labor force grew. While that data may not prompt immediate action from the Fed at the December meeting, it will become increasingly difficult for the central bank to justify maintaining such a high level of accommodation amid improving US metrics and as equity markets continue to press record highs. While the prospects of a Fed taper should ultimately prove supportive for the greenback & bearish for gold in the medium-term, prices have continued to coil up since the monthly open and we now look for a break of the November range for further guidance on near-term directional bias.
The US economic calendar takes a respite next week with the November advanced retail sales print the only release of note. As such we will lean more heavily on developments in price action as we eye a break $1254 - $1211 region. Although our broader bias remains weighted to the downside below $1268, we cannot rule out a possible near-term recovery here on a USD pullback scenario with a topside breach of the monthly opening range shifting our focus higher into the close of 2013. Subsequent resistance targets are seen at $1293/1304 and $1325/29. That said, we’ll continue to eye key support targets at $1209 and $1179/81 with a break below this threshold putting the larger decline off the 2012 highs into focus. - MB