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James Hyerczyk
Comex Gold

Gold prices fell more than 2% on Friday as interest rates spiked lower in response to a stronger-than-expected U.S. Non-Farm Payrolls report. The data led to increased optimism of a rebound in the global economy and a faster-than-expected recovery in the U.S. economy. It also led to speculation that perhaps a widely expected U.S. recession will not be as severe as precious thought.

At 17:56 GMT, August Comex gold is trading $1684.60, down $42.80 or -2.48%.

The surge in Treasury yields drove up demand for the U.S. Dollar, which weighed on foreign demand for dollar-denominated gold. The slightly firmer U.S. Dollar and stronger yields means the opportunity cost to hold gold in a portfolio has gone up, giving money managers a valid reason to liquidate long gold positions.

Daily August Comex Gold

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down earlier in the week when sellers took out the previous main bottom at $1701.60. The main trend will change to up on a move through the previous main top at $1761.00.

The downtrend was reaffirmed earlier on Friday when $1683.30 failed as support. This puts the market in a position to challenge the April 21 main bottom at $1668.40.

The short-term range is $1789.00 to $1668.40. Its 50% level at $1728.70 is resistance. Holding below this level will help maintain the strong downside bias.

The main range is $1454.80 to $1789.00. If sellers can take out $1668.40 then look for the downside pressure to possibly extend into its retracement zone at $1621.90 to $1582.40.

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Short-Term Outlook

A few short-covering rallies aside, we believe August Comex gold is likely to trade into the $1621.90 to $1582.40 retracement zone over the near-term. This is also a key value zone so we expected buyers to show up on a test of this zone.

The primary driver of the selling pressure will be demand for risky assets, rising Treasury yields and the shedding of safe-haven gold positions.

For a look at all of today’s economic events, check out our economic calendar.

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