Gold prices broke down closing at 18-month lows and poised to test the July 2017 lows at 1,204. The dollar index continued to rally lead by a broad based rally in the greenback following stronger than expected jobless claims and factory orders data. The stronger dollar is weighing on the yellow metal as gold prices are quoted in dollar and a rise in the value of the dollar makes gold prices more expensive in other currencies. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The fast stochastic generated a crossover sell signal, which also signals accelerating negative momentum. The only caveat is that the fast stochastic is printing a reading of 15, below the oversold trigger level of 20 which could foreshadow a correction in the price of gold.
Economic data release in the U.S. on Thursday was stronger than expected, but it failed to push the U.S. treasury yield above the 3% mark. The yield continues to remain just below this level following the more hawkish than expected commentary from the Federal Reserve on Wednesday. Traders now await Friday’s non-farm payroll report which is expected to show an increase of 190K new jobs as the unemployment rate dips down to the 3.9% level.
The labor Department on Thursday reported that jobless claims increased to 218,000 for the week ended July 28, which was lower than analysts’ expectations that claims would rise to 220,000 unemployment benefits. The tight claims data portends strong employment.
Additionally, Factory orders increased by 7% according to the Commerce Department. This data point is in shows old data which has already been incorporated into the GDP release which showed that U.S. economy growing at 4.1%.