Top Story

Will gold rebound near $1200?

The month-long slide in gold prices intensified late last week after the US dollar rose on a better-than-expected US jobs report. The dollar was boosted on perceptions that the June rebound in non-farm payrolls could help propel the Federal Reserve towards another rate hike later this year. The stronger dollar weighed heavily on gold, pushing the price of the precious metal further towards its $1200 downside target.

Despite this NFP-driven boost for the dollar and pressure on gold, however, concerns about lagging inflation in the US remain. Friday’s headline NFP beat was accompanied by weaker-than-forecast wage growth data. Average hourly earnings came in lower than expected at +0.2% against a +0.3% forecast, and May’s +0.2% was revised down to +0.1%. These relatively weak numbers are likely to exacerbate concerns that inflation may continue to lag below the Fed’s target.

This week, key inflation data will help further clarify the path of US inflation. On Thursday, June’s Producer Price Index (PPI), a key inflation measure, will be released. Then, on Friday, the Consumer Price Index (CPI) for June will be released. Last month, both the headline CPI and core CPI (excluding food and energy) fell short of expectations. For June, the PPI is expected to come in at 0%, while the CPI is expected to be +0.1%. Any continued weakness in inflation readings is likely to weigh on the dollar and give a much-needed boost to gold.

From a technical perspective, the start of the new week has already seen some loss of downside momentum for gold prices. After dipping below $1205 early on Monday, price pared much of its losses as the trading day wore on. While the past month has seen the precious metal fall precipitously from near the $1300 resistance level, price has now come close to approaching the major $1200 psychological support target. If inflation continues to lag Fed expectations and the US dollar fails to make any meaningful recovery, gold could see a significant rebound from around the $1200 level. Of course, any heightened market volatility on the horizon would also help boost the chances of a gold bounce. With any such price rebound, the key short-term resistance target to the upside remains around the $1250 level.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.