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Gold Prices Plunge Post NFP- Testing Support Ahead of Yellen, CPI

Gold Prices Plunge Post NFP- Testing Support Ahead of Yellen, CPI

Fundamental Forecast for Gold: Neutral

Gold prices were down again this week, with the precious metal off by nearly 2% to trade at 1216 ahead of the New York close on Friday. The decline is poised to mark the largest weekly decline in two months and comes alongside a near-term recovery in the greenback. While the broader outlook for gold remains weighted to the downside, prices are now approaching a key area of interest for support and heading into next week the focus will be on the 1204/09 zone.

Highlighting the economic docket next week will be the semi-annual Humphry Hawkins monetary policy testimony before Congress. U.S. Non-Farm Payrolls released on Friday highlighted a gain of 222K jobs last month with the labor force participation rate rebounding from a 6-month low to 62.8%. Average hourly earnings continued to disappoint however with a downward revision to last month’s read further emphasizing weakness in the inflationary outlook. That said, we’ll be looking for a fresh batch of commentary / questioning regarding the committees willingness to begin offloading the massive balance sheet this year and beyond the prepared remarks traders will be lending a keen ear to the Q&A session with Fed Chair Janet Yellen. The June Consumer Price Index (CPI) & Retail Sales figures are also on tap later next week and could fuel added volatility in both the USD & Gold.

  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +4.74 (82.6% of traders are long)- bearish reading
  • Long positions are 11.1% lower than yesterday but 4.5% higher from last week
  • Short positions are 1.3% higher than yesterday and 1.7% higher from last week
  • While broader retail sentiment continues to point lower, positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Spot Gold trading bias and continues to highlight the risk for near-term exhaustion on the downside.

Find out what current Gold positioning is saying about the current trend. Get more information on Sentiment here Free !

Gold Weekly

The break below basic trendline support extending off the late-January lows shifts the medium-term focus lower in gold prices with the decline now testing initial support at the confluence of the 50% retracement and the late-February low-day / low-week close at 1204/09.

Gold Daily

Prices probed into this key support zone on Friday. Note that the median-line of the current operative pitchfork currently converges on this zone and further highlights the technical significance near-term. Daily resistance stands with the 50-line / 200-day moving average / June 26th swing low at 1232/35.

Gold 240min

A closer look at price action sees gold continuing to trade within the confines of this descending pitchfork formation with prices approaching the median-line late in the week. The immediate short-bias is at risk into this support zone heading into next week. Initial resistance stands at 1219 with near-term bearish invalidation now lowered to 1235.

Bottom line: I’ll be looking for a rebound off these levels early next week with a breach above 1241 needed to shift the broader focus higher in gold prices. A break of the median-line targets subsequent support objectives at 1188 and the 1/27 swing lows at 1181.

Want to learn more about Multi-timeframe analysis? Click here for Michael’s three part trading series.

---Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at or Click Here to be added to his email distribution list.

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