Gold Corrects Lower, How Low Can it Go?

Gold prices dropped lower on the back of some dollar strength that was seen all across the board yesterday. We did not have any major fundamentals or economic events to help the dollar as such but still it could be viewed more as a relief rally and a correction in the dollar strength which has led to the correction in the gold prices. It has to be said that the gold prices have struggled since the beginning of the week and though they have tried to push higher over the past 2 days, they have always been beaten back by some strong selling above the 1270 region during these days and so far, that does not bode well. The prices have corrected lower both times and both times, it has taken a lot of time and effort from the gold bulls to push the prices higher. The prices now trade just above the 1262 support region as of this writing and so far, the gold prices continue to look weak.

Gold Prices Correct

Yesterday, we had the ADP report from the US which came in slightly weaker than expected and it did not cause much reaction from the dollar. The stock markets also moved lower yesterday on the back of weak oil prices but that did not have much of an effect on the gold prices which continued to move lower during the second half of the day after threatening to move much higher during the first half. The market is likely to wait in anticipation of the NFP report tomorrow and until that time, we can expect some more consolidation and ranging in the prices. If the NFP comes in stronger than expected, we can expect the dollar to continue to recover in a strong manner which will then lead to a deeper correction in the gold prices.

Oil prices corrected lower following the much higher build up in the inventory data from the US but as we had pointed out in our forecast yesterday, any correction in the oil prices is likely to be bought into and that’s what we saw yesterday as the prices quickly recover and the buying pushed the prices from below the $49 region to above it within a short span of time and it continues to trade there as of this writing and we believe that the prices will most likely only move higher from here.

Silver prices have been able to hold on to the $16.5 region though there has been a deeper correction in the gold market. The silver prices are likely to consolidate ahead of the NFP tomorrow.