Gold plummets amidst climbing unemployment rate

The data is clear, today’s ADP jobs report indicates that the COVID-19 pandemic has resulted in the highest unemployment rate since the Great Depression.

Today’s numbers are the worst job loss in the history of the ADP report.

As reported by CNBC, according to Ahu Yildirmaz, co-head of the ADP Research Institute, which compiles the report in conjunction with Moody’s Analytics said, “Job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession.”

As traders and market participants await the U.S. Labor Department’s jobs report on Friday, today’s ADP private sector jobs report lost 20.2 million jobs in April. Many economists expect today’s report to be an indication that Friday’s report will be just as gloomy. Economists have forecasted that the Labor Department’s report will indicate that nonfarm payroll fell by an additional 21.5 million in April. This will be added to the March report which showed that 701,000 individuals lost their job.

The data also suggests that the unemployment rate could climb as high as 16%. Considering that the unemployment rate was at 3.5% a few months ago, it is clear that the pandemic has had a profound impact on the economy in the United States which continues to contract.

Currently more than 30 million individuals have applied for unemployment benefits over the last six weeks. MarketWatch suggests that another 3 million probably applied in the past week. This could easily be greater than the 23 million new jobs created at the end of the last recession in 2009.

Although gold sold off sharply today, the gains since March 19 is a total of $235 per ounce. While the recent decline in gold pricing from the highs achieved in April are just over $100, the net gain since the lows of March is significant. Currently (as of 4:35 PM EDT) gold futures, basis the most active June contract are down $24.50 (-1.43%) and fixed at $1686.10.

According to the KGX (Kitco Gold Index) spot gold pricing is currently fixed at $1684.10. Today spot pricing is a net result of traders bidding the price of spot gold lower to the tune of $15.65, with an additional decline of $6.15 which is the direct result of dollar strength.

Noteworthy is the convergence between gold futures and spot pricing. This takes the spread between spot and physical to approximately two dollars. As recently as a few weeks ago this spread had widened to an unprecedented level of between $40 and $55.

Our technical studies indicate that there is still strong support at $1675 which matches the lows achieved at the end of April. The studies also indicate the first resistance level in gold is now once again $1702. Above that price point is stronger resistance at gold’s 50-day moving average which is currently fixed at $1714.20.

Wishing you as always good trading and good health,