Greenwood Trading: The price of gold is set to retest technical lows in the aftermath of strong jobs growth data from the US.
Greenwood Trading: Surging US dollar strength, an absence of inflation in official data and an apparently more sustainable recovery in the US jobs market is forcing the price of gold lower. The yellow metal’s appeal as a safe-haven has been diminished by the easing of geopolitical tensions in Ukraine and what appears to be a move towards higher interest rates by the US Federal Reserve
US non farm payrolls came in at 248,000 last week and the data also included a sharp upward revision to last month’s disappointing number.
“The unemployment rate dropped below the psychological 6% level to 5.9%, the best for 6 years and brought the timing of interest rate hikes back into focus,” said Simeon Kwanda who heads up the economic research facility at Greenwood Trading.
“Gold prices are under pressure and we think there’s a strong likelihood that technical support at $1180.00 will be tested. Regardless, gold is not done by any stretch of the imagination. The metal has a tendency to whipsaw and shake out ‘weak hands’ – but we believe the magnitude of the price rebound will surprise everyone,” he continued.
Greenwood Trading has told clients that any increase in US interest rates will almost certainly be reversed when the economy starts to struggle. “If the economy could withstand higher rates, they’d have been raised long ago. The Fed knows that the recovery is dependent upon cheap money; accommodative monetary policy isn’t something they can easily wean the economy off and that’s why investors should be looking to buy gold in preparation for the return of quantitative easing, “concluded Kwanda.
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