Gold prices rose on Friday as US Treasuries fell to their lowest level since Sept. It was the US dollar, which remained flat against a basket of major currencies throughout the session that helped limit gains, according to market analyst James Hyerczyk. Market analyst Christopher Lewis states that gold markets had another negative week breaking through a key bullish line, but bounced back enough on Friday to at least retest. Analysis of James Hyerczyk and Christopher Lewis in the context of developments in the markets cryptocoin.com We compiled it for our readers.
“Decrease in unemployment rate means weaker gold prices in the long run”
Speculators ignored the headline figures from disappointing nonfarm payrolls, while ignoring the unemployment rate, which has fallen to a 21-month low. Traders say the price action was likely driven by position adjustments in response to disappointing data in the November US Nonfarm Payrolls report, fears of the Omicron coronavirus variant, and the divestment of riskier assets. Despite Friday’s strength, gold prices closed down 0.4% for the third week in a row as Fed officials gave a hawkish tone on stimulus cuts and interest rates.
Gold’s price action makes little reference to the disappointing nonfarm payroll headline numbers from aggressive speculators, while ignoring the most significant unemployment rate, which has fallen to a 21-month low, according to analyst James Hyerczyk. The analyst makes the following assessment:
The headline numbers may be enough to fuel the short-term rise, but the drop in the unemployment rate points to weaker gold prices in the long-term. In other words, there was nothing in the report to discourage the Fed from raising interest rates earlier than previously thought and from increasing the tapering rate.
U.S. employment growth slowed significantly in November due to job losses in retail and local government education. However, the unemployment rate fell to 4.2%, indicating that the labor market is tightening rapidly.
James Hyerczyk: Jerome Powell’s hawk reviews discourage sellers, while Omicron variant attracts buyers
US Treasury yields fell in the volatile session on Friday, with the 10-year yield falling below 1.4% for the first time since September. The reason for this, the analyst states, is that the risk aversion in the markets lowered Wall Street and increased gold prices. The benchmark 10-year interest rate fell to 1,355, its lowest level since September 23.
The US dollar reversed gains, showing little change on the day, after a weaker-than-expected US jobs report was released for the previous months, still with positive revisions and solid details on the labor market. The dollar closed the week broadly unchanged, despite rising to its highest level since July last week. The analyst states that we may be looking at a volatile trade until the Fed’s monetary policy meeting on December 14-15 and comments:
Trading targets will likely be driven by increased short-term yields, which tend to be bearish for gold prices, and lower long-term yields, which tend to support gold.
Also, Fed Chairman Jerome Powell’s hawkish comments to Congress last Wednesday encouraged sellers, while growing concerns about the Omicron variant are attracting buyers.
“Wait for this candlestick to break in one direction before placing a bet”
Market analyst Christopher Lewis states that gold markets had another negative week breaking through a key bullish line, but bounced back enough on Friday to at least retest. Therefore, we are likely to see a move sooner or later as the market tries to figure out where it wants to go in the longer term. “Be very careful with the US dollar,” said the analyst, reminding that if it continues to rise, it will eventually work against the value of gold. Christopher Lewis comments:
In addition, rising interest rates in America is also a bad thing for gold. So I think we need to be very careful going forward and it’s probably just a matter of time before we get an answer on which direction to go.
According to the analyst, the easiest way to play this candlestick is to wait and see which way we break: higher or lower. The analyst believes that while the candlestick has a red body, the range itself is showing a little more along the lines of confusion, and therefore, the market will eventually drop to either the $1,825 region or the $1,700 level. When the analyst looks at the 50-week EMA, he thinks that it is somewhat sideways at the moment and therefore it makes some sense to be confused, and makes the following assessment:
At this point, I believe the market will likely see a larger move. But when it comes to “risk-free” or potentially “risky” behavior, we need some form of certainty. Either way, wait for this candlestick to break in one direction or the other before putting any money into the business.
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