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Jobs Report Week: Gold Stays Firm

Graceland Updates 4am-7am
Jan 31, 2017

  1. As I have noted for many years, gold has a rough general tendency to decline ahead of the US jobs report, and then rally in the hours and/or days following the release of the report.

  2. The next monthly jobs report will be released at 8:30AM on Friday. This report and the closure of the Chinese gold market for the New Year's holiday should be quite negative for gold, but...

  3. The sell-off from the $1220 area is orderly, and gold feels firm.

  4. Please click here. Double-click to enlarge. Gold did break down from a small double top pattern.

  5. The price target of the pattern is $1170, but there may be an uptrend channel forming. I've highlighted that in blue.

  6. Also, the lead line of the 14,7,7 Stochastics series oscillator that I use exclusively on daily bar and candlestick charts is now sitting at about 50, where momentum-based rallies can occur.

  7. With China offline and the jobs report dead ahead, why is gold acting so firmly? Well, please click here now. Double-click to enlarge. The US dollar looks very weak on this daily bars chart against the Swiss Franc.

  8. It's broken down from a head and shoulders top pattern, and has not rallied since arriving at technical support yesterday.

  9. The rally could still happen, and that would likely push gold down to $1170 ahead of the jobs report.

  10. Given that gold has rallied from $1125 to $1220, a decline to $1170 is perfectly normal. An orderly decline like this should not make gold investors nervous.

  11. Please click here. Double-click to enlarge this dollar versus yen chart.

  12. All gold community eyes should be focused on the 112.50 price level. A breakdown below that level would almost certainly usher in a gold price rally to my $1250 target zone.

  13. The Swiss franc, the Japanese yen, and gold bullion are all viewed as key "risk off" assets by bank FOREX traders.

  14. It's clear that the dollar is struggling now against both the franc and the yen.

  15. Please click here. Double-click to enlarge this weekly bars euro versus the dollar chart.

  16. The euro never rallied against the dollar in 2016 in the way that the franc, yen, and gold did.

  17. That's partly because Europe's economic recovery has been more anemic than America's, but mainly because euro is not viewed as a safe haven currency by the large bank traders.

  18. Having said that, most gold price discovery takes place in US dollars, and a rally in the euro could add some zest to the gold price!

  19. The recovery taking place in Europe now could be enough to reverse the ECB's policies of QE and low interest rates.

  20. That would create both European inflation and a euro rally.

  21. Please click here. Double-click to enlarge this daily bars GDX chart.

  22. Gold stocks are performing exceptionally well since gold ran into resistance at my $1220 target zone.

  23. Can GDX rally to $25 if gold falls to $1170? I think that's asking a bit much (for now), but GDX should easily rally to $25 if gold can climb back to $1220.

  24. A rally to $1250 would likely see GDX surge to $28, and a bigger move to $1650 for gold should see GDX make a new all-time high. That's a bit further down the road, but eager gold stock investors should ensure they are building a solid block of core positions now, to partake in all the upside fun!

Thanks!
Cheers
St

 

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