Gold Likely to Remain Firmly Bid Through NFP 

Gold prices have rallied since the Fed meeting, leading to a significant breakout. I expect dips will be bought in the near-term, even if the US jobs report triggers a downward move.

Gold Prices Nov 1

Gold Daily Chart

Wednesday’s Fed meeting has triggered renewed strength for gold prices

 

In yesterday’s article, I talked a bit about a ‘pause’ in the markets following the Fed-inspired moves as investors will want to wait and see what the US jobs report looks like. At this stage, I think the jobs report presents a greater chance of gains for gold than losses. In other words, the risk is to the upside here.

 

The reason I say that is because gold prices have once again broken back above an important declining trendline. This trendline originates from the high posted in September. Further, spot is once again above $1500 and there’s some fairly strong upside momentum over the past two sessions. This leads me to believe that dips will be met with buyers.

 

The only thing that would change my view and cause a shift to a bearish bias is if the jobs report comes out much stronger than expected. The bar has certainly been set low as analysts are only looking for 90 thousand new jobs in October. They are also expecting the unemployment rate to tick up.

 

But a low bar, to me, means that analysts don’t think it will be a good report. If the NFP report does come above expectations, we might see a bit of a pullback. But it will probably take a much stronger report compared to the analyst estimate to trigger a reversal. After all, investors seem to be showing that they believe the US economy weakening a bit if you consider the price action since the Fed meeting.

 

The reason I say the risk is tilted to the upside here is that a potential further technical development will materialize if gold pushes just a bit higher.

 

While gold has broken above the mentioned declining trending, there is a further hurdle that I’ve marked off on my charts at $1520. This level capped all the rallies in October, therefore a bullish break would signal a range breakout. Such a technical breakout carries a measured move target to around $1560, which incidentally, aligns with my bullish objective for the yellow metal.