Gold Continues Free Fall, Now Flirting With $1200

traders await tomorrow’s jobs report, along with next week’s FOMC meeting, gold continues to lose value. Obviously, the looming interest rate hike has not been fully factored into gold’s current pricing. As the selloff continues, it is taking prices to nearly $1200 per ounce.

Now trading at a five-week low, gold continues to react negatively to an anticipated interest rate hike by the Federal Reserve on March 15. This selling pressure has resulted in eight consecutive trading days in which gold has continually closed lower.

Even with the dynamic rally in gold, which began on December 15 of last year and culminated with $145 gain on February 27, gold prices are 7% lower since Donald Trump won the election last year.

Market Participants Continue to Factor in Rate Hike

As we spoke about yesterday, based on CME’s FedWatch tool there is now a 100% probability that the outcome of this month’s FOMC meeting will be an interest rate hike.  Tomorrow’s report will give traders the last piece of fundamental data that the Fed will integrate into next week’s actions. Current estimates suggest that 190,000 new jobs were added last month.

If the report numbers are as reliable as the estimates, the Fed will have the necessary data to believe that an interest rate hike is now appropriate. According to OCBC analyst Barnabas Gan, "If the (nonfarm payroll) data does come in better than market expectations, it will drag gold prices further.”

If tomorrow’s numbers are significantly below the estimate, we could see gold prices stabilizing.

Is That a Ceiling or a Floor? Current Support and Resistance Levels

Support and resistance levels are part and parcel of the same thing. Sitting in my office on the second floor of the building, I look down at the floor which supports me. Yet, from a first-floor perspective, that same structure composes the ceiling above me, and is in fact resistance. It is a matter of current perspective and price action that will determine if a price point acts in a supportive manner or as a point of resistance.

Based on our current studies, we see the current support level at 1200 - 1198. Below 1200 the next support level is 1178, which is a 61.8% retracement of the 2017 rally, and is a significant support level. Resistance areas begin at 1211, 1240, and 1265, which is the highest point gold has traded to this year.

Wishing you as always, good trading,