Gold Outlook Unfazed by Dismal NFP Report, Falling U.S. Equity Prices

Gold Talking Points

Gold was little changed even as the U.S. Non-Farm Payrolls (NFP) report dragged on the dollar, and the current environment may keep the precious metal within a narrow range as the data prints do little to alter the monetary policy outlook.

Gold Outlook Unfazed by Dismal NFP Report, Falling U.S. Equity Prices

Gold remain unfazed by the developments coming out of the world’s largest economy even as U.S. equity prices come under pressure, and the precious metal may continue to consolidate over the coming days unless the recent rout in risk appetite ultimately spurs a flight to safety.

Until then, the current environment may keep bullion within a narrow range as Federal Reserve officials remain upbeat on the economy, and Chairman Jerome Powell & Co. may continue to strike a hawkish forward-guidance for monetary policy as ‘the economy is strong, unemployment is near 50-year lows, and inflation is roughly at our 2 percent objective.’ With that said, the lackluster NFP print may do little to derail the Federal Open Market Committee (FOMC) from its hiking-cycle, and expectations for higher U.S. interest rates may keep gold prices under pressure especially as retail interest remains heavily skewed, with the IG Client Sentiment Report showing 83.7% of traders still net-long bullion.

The ratio of traders long to short stands at 5.12 to 1 as the number of traders net-long is 4.1% lower than yesterday and 12.1% lower from last week, while the number of traders net-short is 5.0% higher than yesterday and 2.3% higher from last week. The persistent slant in retail interest provides a contrarian view to crowd sentiment, with the string of failed attempts to test the August-high ($1225) still fostering a bearish outlook for bullion as both price and the Relative Strength Index (RSI) snap the bullish formations carried over from the same period.Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Gold Daily Chart

• Lack of momentum to push back above the $1210 (50% retracement) to $1219 (61.8% retracement) region may bring the downside targets back on the radar, with first area of interest coming in around $1172 (61.8% retracement) to $1177 (78.6% retracement).
• Need a break/close below the Fibonacci overlap to bring up the 2018-low ($1160), which sits just above the $1156 (61.8% retracement) hurdle.

For more in-depth analysis, check out the Q4 Forecast for Gold

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— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.