Gold Prices Rise and Implied Volatility Slumps to 2-Month Lows

Key Insights

• Gold prices edge higher
• The dollar continued to rally, weighing on gold
• U.S. Treasury 10-year yields broke after robust jobless claims data

Gold prices moved higher on Thursday but continued to face headwinds as the dollar broke out to a fresh 2022 high. Since gold prices are quoted in dollars, the gain in the currency weighs on the yellow metal. Gold prices have been rallying versus the Euro. Stronger than expected jobless claims lifted Treasury yields.

The 10-year yield broke out to fresh highs following the Labor Department’s report on U.S. initial jobless claims data.

Initial jobless claims fell to 166,000, well below expectations of 200,000 and 5,000 under the previous week’s total, revised lower. The Labor Department noted that it revised claims from 2017 to 2021 and changed the seasonal factors to calculate the numbers. Last week’s total was the lowest since November 1968.

Technical Analysis

Gold moved higher against the dollar. Implied volatility on gold prices dropped to the lowest levels seen since February. Implied volatility is the measurement that determines option prices that are now inexpensive.

Prices remain below short-term resistance near the 10-day moving average at 1,931. Support is seen near the 50-day moving average at 1,906. Short-term momentum reversed and turned positive as the fast stochastic generated a crossover buy signal.

The flip-flop reversals of the fast stochastic reflect a period of consolidation. Medium-term momentum remains negative as the MACD (moving average convergence divergence) histogram prints in negative territory. The trajectory is decelerating, which points to consolidation.