Gold Price Regroups at $1,280

May 5th, 2016 by

Gold prices are mostly steady just above yesterday’s spot close of $1,279 an ounce, after falling the last two days. The dollar is rallying for the third day, putting pressure on commodities, including gold. Oil futures are getting bid on the back of the huge wildfire around Alberta oil sands, which has caused the evacuation of over 80,000 people.

Of course, tomorrow morning’s Non-Farm Payrolls report will move markets around the globe, so any trades being made today are done so with an eye on that.

Also with an eye on the NFP, technical numbers for gold this morning put this week’s high of $1,306 out of reach for today. Conversely, the downside should also be limited today. First resistance is encountered at $1,285, then $1,289. First support is $1,281, then $1,279.

fear of rate hikeRecent talk by senior Fed officials trying to boost expectations of a June interest rate hike are having to deal with the reality of worse than expected employment numbers. The ADP private payrolls report came in 39,000 jobs lower than expected, for the slowest monthly growth in 3 years. First-time jobless claims for last week jumped 17,000 applications, to 274,000. This is the highest number of newly-fired people in five weeks, and largest jump in over a year. There were 14,000 more applications than expected. Another down note is a report that planned layoffs surged 35%.

It isn’t just employment numbers that should give the Fed pause. The EU referendum in Britain could plunge world financial markets into turmoil if voters call for the UK to leave the EU.

Oil prices are rebounding for all the wrong reasons this morning. A gigantic wildfire in the oil sands region of Alberta, Canada is burning out of control for the fifth day. Over 88,000 people have fled their homes, as the blaze threatens to destroy the city of Fort McMurray. The fires are also forcing the shutdown of many oil drilling and processing operations in the area.

burning-oil-industryOn the other side of the world, increased fighting among factions battling for control of Libya is threatening oil exports. Yesterday, an oil tanker that was refused permission to load at the eastern oil terminal at Hariga stood out to sea to await developments. Oil exports from the faction controlling the eastern portion of Libya have been blacklisted by the UN.

The big turnaround in the dollar today may have more to do with belief that the Fed may raise interest rates in June, rather than any technical factors.

Again, the non-farm payrolls report tomorrow is going to steer almost every stock index and commodity. A low read should depress the dollar and give gold a boost heading into the weekend.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product