Gold Price Prediction for February 1, 2018

Gold prices whipsawed initially moving higher as the dollar lost ground, but the greenback gained traction following a stronger than expected ADP private payroll report, which weighed on the prices of the yellow metal.  U.S. yields broke out, as wages and employment costs increased.

Technicals

Gold prices whipsawed on Wednesday, forming a doji day which is a sign of indecision.  Prices were unable to recapture the 10-day moving average which is now seen as resistance. Suport I sse3en near the January lows at 1,308.  Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal.

ADP Private Payrolls Were Stronger than Expected

U.S. ADP reported private payrolls increased 234k in January from a revised 242k gain in December which was revised down from 250k. The service sector added 212 and the goods sector rose 22k. In the former, trade/transport rose 51k and helped pace the headline gain. Education and health added 47k, while employment in leisure and hospitality increased 46k. For the goods sector, manufacturing was up 12k and construction rose 9k.

Employment Costs Rose

U.S. ECI showed employment costs posted a 0.6% growth rate in Q4 after 0.7% in Q3, 0.5% in Q2, and 0.8% in Q1. Wages and salaries increased 0.5% last quarter versus 0.7% previously, with benefits up 0.5% compared to 0.8%. Compared to the same quarter last year, ECI is at a 2.6% year over year rate versus 2.5% year over year, and is ties Q1 2015 for the fastest since 2008. Private industry compensation was up 0.5% versus 0.8% in Q2, with wages up 0.6% from 0.7% and benefits up 0.4% compared to 0.7%. On the government end, compensation jumped to a 0.8% rate from the prior 0.6%, with wages up 0.6% compared to 0.5%, and benefits 1.0% higher versus 0.8%.

The MBA Mortgage Index Declined

U.S. MBA mortgage market index sank 2.6%, along with a 3.4% drop in the purchase index and a 2.9% fall in the refinancing index for the week ended January 26. The average 30-year fixed mortgage rate rose 5 basis points to 4.41% after a heavy dose of supply and rising global yields that began accelerating last week.