Gold Prices Rally as Yields Drop Following Disappointing Payroll Print

Gold prices moved higher for a third consecutive trading session. The dollar eased, and yields dropped in the wake of the disappointing jobs report released by ADP. The 10-year yield dropped more than the 2-year yield. The decline in the U.S. was counter to the increase in European yields after a stronger than expected EU inflation report. Inflation increased by 5.1% year over year in the EU compared to expectations that it would decelerate to 4.4% from 5% in December.

Technical Analysis

Gold prices rallied for a third consecutive trading session. Prices recaptured resistance which is now supported near the 200-day moving average at 1,805. Resistance is seen near the 10-day moving average at 1,818. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is negative as the MACD (moving average convergence divergence) index has generated a crossover sell signal. This situation 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 MACD histogram prints in negative territory with a downward sloping trajectory pointing to lower prices.

Private Payrolls Declined

ADP reported on Wednesday that private payrolls for January unexpectedly declined by 301,000 for the month, well below forecasts that there would be an increase of 200,000. Some believe that the unset of the omicron variant of the COVID-19 virus hampered. December’s numbers were revised down to 776,000 gain in December. It was the first time ADP reported negative job growth since December 2020. The pandemic-sensitive leisure and hospitality industry was responsible for more than half of the decline, as companies reported a drop of 154,000.