Gold Prices Fall Below Key Support... Again, What’s Next?
San Francisco (Oct 7) Unable to hold on to its gains following a weaker than expected nonfarm payrolls report, gold futures have now fallen through key long-term support levels.
gold prices have broken key support at $1,250 an ounceMost analyst were keeping an eye on the $1,250 level as it was a key support level for the 2016 rally; however gold is solidly below that level, last trading at $1,249.80 an ounce, down 0.25% on the day. Analysts say that there is the potential for gold to fall another key level that could ultimately signal the end to its uptrend. The latest selling pressure has pushed the yellow metal down almost 6% since the start of the week.
“Gold is still finding a technical bottom and it is really hard to pin point where prices will settle,” said Bill Baruch, senior market analyst at iiTrader.
He noted that the employment report didn’t provide gold much support because it good enough to prompt the Federal Reserve to raise interest rates in December. In an interview on CNBC, Cleveland Fed President Loretta Mester described the employment report as “solid” despite it coming in weaker than expected.
Jessica Fung, senior analyst at BMO Capital markets also agreed that gold has room to fall further in the short-term and in the next few months as markets start to price in a rate hike, which will provide more support for the U.S. dollar.
Fung added that most of the selling is technical as the drop is causing stop-loss trades to be triggered so there is no telling how far prices will fall in the near-term.
Although gold continues to give up its gains since the start of the year some analysts still have hope that the market can bounce back.
In an interview earlier in the week, Ole Hansen said that gold remains in its uptrend as long as the $1,200 level can hold.
Adam Button, senior analyst at Forexlive.com said that traders need to wait until Monday. He noted that gold has fallen during a week that Chinese markets have been closed.
“Today there is obviously no appetite for gold but investors might have a second chance and we will have to wait to see if there is strong demand Monday when Chinese markets reopen,” he said.
Button also agreed that although gold has lost significant ground this week, he wouldn’t be looking to short the market until the June lows around $1.220 are broken.