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Gold Price Eyes Jobless Claims Data as New Virus Cases Spike

Gold Price Eyes Jobless Claims Data as New Virus Cases Spike

Rich Dvorak, Analyst

GOLD FORECAST: GOLD PRICE ACTION TURNS TO JOBLESS CLAIMS & CORONAVIRUS CASES FOR BULLISH CATALYST

  • Gold price action has enjoyed bullish fundamental tailwinds like recent fiscal stimulus efforts and central bank balance sheet growth
  • Gold prices keep rising and propelling the precious metal to fresh year-to-date highs as investor uncertainty lingers and the coronavirus pandemic persists
  • Real yields continue to slump and is a trend likely to continue thanks to copious amounts of liquidity flooding the financial system

Despite an influx of investor risk aversion on Wednesday, gold prices oscillated and closed slightly lower on balance. This follows the precious metal’s topside breakout to a fresh yearly high during the prior trading session. The price of gold has advanced steadily off its 20 March swing low as Fed asset purchases balloon.

Gold MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 2% -4% 1%
Weekly 4% 14% 5%
What does it mean for price action?
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Broadly speaking, this bullish fundamental driver, in addition to FOMC projections anchoring the Fed funds rate to zero, helped propel the anti-fiat commodity within reach of record highs. Gold price action now flirts with another critical technical barrier that might hinder further advances, however.

GOLD FUTURES PRICE CHART: DAILY TIME FRAME (27 JAN TO 24 JUN 2020)

Gold Price Chart Gold Futures Forecast Liquidity Stimulus Real Yields Coronavirus Second Wave Recession Unemployment Jobless Claims

Chart created by @RichDvorakFX with TradingView

After eclipsing the $1,760-price level earlier this week, which the precious metal has struggled to surmount since April, gold bulls likely set their sights on the psychologically-significant $1,800-handle. This next potential zone of technical resistance is highlighted by the February 2012 and October 2012 swing highs. Topping this area could open up the door for gold prices to target all-time highs near $1,880.

That said, gold price action could get a jolt from upcoming jobless claims data due Thursday, 25 June at 12:30 GMT. Gold prices might rise if job losses continue to mount or continuing claims persist above 20-million Americans filing for unemployment insurance. This is seeing that evidence of lasting structural damage done to the US labor market has potential to prompt another injection of Fed liquidity and/or fiscal stimulus.

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Building coronavirus second wave risk as new cases surge could warrant a similar market reaction. At the same time, it is possible that gold prices might gain ground in response to better-than-expected jobless claims data. This is considering an improvement in labor market conditions stand to boost inflation expectations, and steer real yields lower, which is typically bullish for gold price action. Nevertheless, it is worth mentioning the chance that widespread market selling pressure, similar to the dash-for-cash earlier this year, could cause investors to overlook gold as a safe-haven asset in favor of the almighty US Dollar instead.

-- Written byRich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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