Gold Trades Lower to Critical Support and Recovers after the Release of U.S. Jobless Claims

Gold futures traded to a low today of $1791 which is a few dollars below this technical support level. This price point is also the 50% retracement from a data set that begins at the March lows of $1672, up to the highs achieved at the beginning of June when gold touched $1920.

However, gold scored modest gains on the day recovering from intraday lows below $1800, with the most active August 2021 Comex contract gaining $3.40 on the day and closing around $1806. Currently, we have gold futures trading in Australia up $2.20 and fixed at $1807.60.

The recovery was based upon two primary events, the first of which was a release by the U.S. Labor Department of jobless claims. According to CNBC, U.S. jobless claims showed a surprise gain, well above expectations. The weekly jobless claims totaled 419,000 for the week ending July 17. Estimates by Dow Jones anticipated that the weekly jobless claims would come in around 350,000 before upwardly revising that number two 368,000 from the previous period.

“The jobless total was the highest weekly count since May 15 and came amid expectations that the jobs picture will improve markedly as enhanced unemployment benefits end and companies get more aggressive about filling vacant positions.” Currently, the total of individuals receiving benefits under all government programs is 12.57 million.

According to Reuters, “The number of Americans filing new claims for unemployment benefits rose slightly last week but continuing claims dropped, another indication that the labor market recovery from the COVID-19 pandemic continues to be choppy.”

The second primary event was an announcement by the European Central Bank which was interpreted as dovish. According to MarketWatch, “Early Thursday, U.S. Treasury yields had continued to rebound from a five-month low and the dollar strengthened after the European Central Bank struck a dovish stance as it adjusted its rate guidance following its earlier adoption of a new inflation target.”

Carlo Alberto De Casa, market analyst for Kinesis, told MarketWatch that he still, “sees the current phase as a “consolidation, with decent chances of a new rebound in the next few days if the U.S. dollar slows down.”

What is key in recent trading activity is that gold continues to consolidate but holds the critical support level at approximately $1795. It is tested those lows on multiple occasions and recovered, closing well above $1800. This is truly consolidation.

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Wishing you, as always, good trading and good health,

Gary S. Wagner