Gold Price Prediction – Gold Rallies Generating Outside Day Following Soft Payroll Report

Gold prices rebounded on Friday following a weaker than expected U.S. payroll report that put downward pressure on the dollar paving the way for higher gold prices. Gold generated an outside day which is a higher high, a lower low and a higher close. An outside day usually occurs as the top or bottom of a trend. The outside day could be creating a bottom for gold, but prices were unable to pierce through resistance near the 10-day moving average at 1,221. A close above this level would lead to a test of target resistance near the 50-day moving average at 1,258. Support is seen near the August lows at 1,204 which coincides with the July 2017 lows at the same level. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero-index level with a flat trajectory which reflects consolidation.  The fast stochastic is printing a reading just below 15, which is below the oversold trigger level of 20 and could foreshadow a correction.

Jobs Data was Softer than Expected

On Friday the U.S. Labor Department reported that non-farm payrolls increased by 157K jobs, less than the 190K expected. The unemployment rate dipped to 3.9% which was in line with expectations. Average hourly earnings, which is a key gauge of wage inflation, increased 2.7% which was also in line with expectations. Last months payroll report showed a revision which increased the number of jobs produced. Overall, traders were less than enthusiastic about the jobs report, which helped put downward pressure on yields. Lower yields allowed the dollar to ease paving the way for a rebound in gold prices.

On the trade front, China said it plans to retaliate and increase tariffs on approximately 60 billion of U.S. imports.  The central bank also reinstated a 20% reserve ratio for financial institutions conducting FX forward transactions, to help ease the downward pressure on the yuan.