Gold prices encounter major technical resistance, as they attempt to break above key resistance levels. This struggle is made that much harder by some recent and alarming data from the US labor market. The latest Nonfarm Payrolls (NFP) report surprised with a sign of a still strong job market, partly weighing on gold upward pressure. As the valuable metal continues to stay near key high trading ranges, investors should be careful and stay on top of market trends.
As for now, gold is bouncing off the bottom of a medium-term bullish channel, giving nearterm support at $3,360. Analysts draw attention to the key $3,350 level. A strong move below this hurdle might see a drop to the 20-day SMA of $3,297. If enough bullish momentum comes together, a target of $3,500—the April all-time high—could be in the cards for gold. It has struggled against clear resistance at the $3,392 mark, which has capped its upward potential for most of the week.
Technical Analysis of Gold Prices
Despite the volatility of the US Dollar (USD), gold prices have continued to stay strong above $3,350 level. This steadiness comes on the heels of a narrow trading range during the last four days, with few signs of weakness in this resilient metal. That said, $3,400 psychological level is still a major hurdle to bullish continuation.
Such an overall technical view makes for a relatively wary and cautionary forecast for gold which is now rapidly nearing key overhead resistance levels. All in all, the price action suggests that there is indeed opportunity for a bullish movement. Such a move is dependent on clearing these obstacles. Futures analysts are still on the lookout for a close under $3,350. A break below this threshold would likely indicate a larger change in sentiment and potential for further downside.
We can thank the most recent NFP report for a big part of that market expectation. With the US economy adding 139,000 new jobs in May—surpassing analysts’ predictions of a 130,000 increase—the labor market shows signs of strength. This good news has only played into a stronger USD, which usually puts downward pressure on gold prices.
Impact of US Economic Indicators
The uncertain picture created by the mixed signals from the US economic data would add to the difficulty at this moment. The new ADP Employment report showed the private sector added just 37,000 jobs in May—well below analyst expectations. The Unemployment Rate has remained at 4.2%. This is an important stability—it hints at the fact that while job growth is definitely happening, it’s not happening at a pace that will generate robust confidence.
On a macro level, the US Gross Domestic Product (GDP) numbers show an economy that continues to expand. The GDP growth accelerated more than expected, growing 0.6% QoQ versus consensus estimates for a 0.4% expansion. YoY, GDP came in hot at 1.5%, beating the 1.2% forecasted. These indicators suggest an economy that’s doing better than we thought, which only adds more layers of complexity to gold’s outlook.
Initial Jobless Claims increased to 247,000 last week, topping analyst predictions of 235,000. This rise may be driven by an expectation of increasing job insecurity, highlighting the bifurcated nature of the labor market’s current condition.
Market Outlook for Gold Prices
With gold prices continuing to steer away from these key economic indicators and technical levels, the market was reminded to stay on its toes. It will be the interaction between the strength of US labor market penetration and gold’s subsequent reaction that’ll be key in deciding medium-term direction. Should bullish momentum increase above the nearby resistance levels, gold has the potential to rally sharply. Investors could watch it blow past its previous all-time high set in April.
If prices do break below $3,350, this could lead to a re-evaluation of investment strategy. The technical landscape suggests that continued action under this level would set in motion deeper drops. Watch for a deeper correction toward the 20-day SMA at $3,297.