Gold prices have skyrocketed this week, up over 3%. In fact, early Tuesday, they teased the $4,150 ceiling. This is the highest gold has been in three months’ time, causing a wave of optimism for investors. With gold nearing the cusp of potentially significant resistance, active traders have their eyes peeled for important bull/bear price points that could signal what’s next.
It is readily apparent that gold buyers have established a strong line in the sand at $3,973. This price point represents the 38.2% Fibonacci retracement level of the last advance. The bold rejection way above $4,129 is all-you-want-for-much-higher-gains-necessary. This level would represent the 23.6% Fibonacci Retracement from the stunning parabolic advance that began on Aug. Analysts suggest that closing above this threshold on a daily candlestick basis could create additional bullish momentum for gold prices.
Key Resistance and Target Levels
Gold is today bouncing around $4,150. Market participants have shifted their attention to the next big milestone at the $4,200 mark. If gold breaks above this level, most analysts expect a new uptrend to begin. This wave may push average prices up to the all-time high of $4,382 hit earlier this year.
It’s bullish everywhere – and the current technical indicators certainly confirm that. The 14-day Relative Strength Index (RSI) for gold is still showing strength well above the midline, with a reading of just under 60. In the near-to-medium term, buyers will continue to have the upper hand. This trend will help continue to drive up gold prices.
Market Influences and Economic Data
From geopolitical risks to safe haven considerations, here’s what’s putting upward pressure on gold prices right now. Hopes surrounding the reopening of the US government imply a resumption of economic data publications, which could significantly affect market sentiment. Investors are eagerly anticipating the US Nonfarm Payrolls (NFP) report for the month of September. They’re keenly focused on the October Consumer Price Index (CPI), as these data releases would be just the ticket to confirm expectations for a rate reduction by the Federal Reserve in December.
The market now places roughly a 64% chance that the Fed cuts rates in September. This fascinating piece of information comes courtesy of the CME Group’s FedWatch Tool. After all, demand for non-yielding assets like gold tends to increase during times of lower interest rates. This recurring trend has been a solid support for gold.
All eyes will be on the US ADP weekly jobs report. That is the hope, especially with the prospect of the end of the government shutdown coming to a head. This report takes an in-depth look at the changes in private sector employment. It provides a highly valuable contemporary picture of the labor market’s overall health, which is critical for assessing economic conditions.
Technical Levels to Watch
For more speculative traders in the gold market, first support comes in at the 21-day SMA at $4,086. Should they break below this level further focus would be on the psychological support at $4,050. Breaking below these support levels may be a sign of a greater change in market sentiment, potentially ushering in greater volatility.
The US bond markets will close early, on Tuesday, to celebrate Veterans Day. Given this closure, the ensuing release of our weekly US private sector Employment Change (4-week average) data takes on special importance for gold traders. Those results will not only shed light on broader employment trends, but affect how investors think of and invest in the gold market.