wWith only two days left before the end of the month, gold prices are on their way to end the month in the red. Over the previous four months, the price had been declining, and a close lower than the previous month’s close of 1965 would further unnerve anxious investors. Investors have been watching the gold market closely over the last two trading days to see if it can reverse its downward trend or if they should prepare for bigger losses.
Gold prices had a difficult time during this month, as the price was mostly traded during this month, with the lowest level at 1884, and the lowest level for the previous month was 1902.
Weekly chart showing the price of gold from Avatrade
Chart showing the daily price of gold from Avatrade
The sell-off in gold was more pronounced against the dollar, which has gained more momentum this month as investors continue to weigh the next policy move by the Federal Reserve while trying to understand the health of the US economy. . Historically, holding gold assets in the hope of a recovery has made many investors concerned about their portfolios. Since gold is often considered a safe haven during times of uncertainty, the recent decline in gold prices has raised concerns about the economy as a whole.
At the beginning of this week, investors were mainly focused on a number of important economic events that were scheduled to be released this week and were supposed to impact the price of gold. For example, today we saw two important economic readings that worried investors. First, data on US consumer confidence was released. The number was expected to record a reading of 116, which was actually slightly lower than the previous figure of 117. However, the actual number came in much weaker than expected and recorded a reading of 106. This disappointing result caused a slight panic among people. This indicates a potential slowdown in consumer spending, which could have a negative impact on the overall economy. As a result, the price of gold saw a temporary rise as investors sought a safe haven for their money.
In addition, another economic event that had a significant impact on the price of gold was the release of the opening JOLTS jobs number in the United States. Analysts were expecting a slight improvement in the number, and expectations were 9.49 million, while the previous number came at 9.17 million. But the actual number printed was 8.83 million. This number completely spooked the markets, as talk of a soft landing and a hard landing once again raged.
The figure clearly indicates a picture indicating a high level of unemployment. Further evidence of this came in today’s US ADP data, which printed a much weaker reading than market expectations. ADP data came in at 177K, while expectations were at 194K. The ADP number generally sets the tone for the most important economic reading of the US economy, which is known as the US NFP.
Going forward, investors will closely monitor the non-farm payrolls numbers, which are scheduled for release on Friday. The health of the US economy and the progress of its recovery will be further highlighted by the release of these data. If the data comes in below expectations (expectation is 169K vs. 187K prior), this could push investors to rush into safe havens like gold, sending the price higher.
On the one hand gold trading, There are a number of factors that play a role. However, from a price technical perspective, it is clear that significant support remains near the 1884 price level. Today’s data brought a lot of good news for the bulls, and the price rose as a result as the dollar index fell sharply and investors expect less action from the Fed . The major immediate resistance that traders are watching this week is near 1984 (which is just above this month’s high, which was 1965). If the economic figure due out on Friday shows an improvement in the economy, we could see the price retesting the aforementioned support at 1884.
However, if the narrative changes to a level where traders begin to expect lower chances of a rate hike from the Fed, leading to a weaker dollar index, this could push the gold price higher towards the 1965 resistance level, followed by the 1984 price point.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.