Gold price rebounded on Monday and is nearing the highest level in three weeks as investors reacted to the latest US jobs report and waited for Tuesday’s inflation data. It jumped to $4,130, up by over 7% from its lowest level this year.
Gold jumped after the strong US jobs data
Gold rose on Monday, even after the US published strong jobs numbers, which raised the possibility of the Federal Reserve hiking interest rates. The report showed that the economy created 165,000 jobs last month, much higher than what analysts were expecting.
The Bureau of Labor Statistics (BLS) showed that the unemployment rate dropped to 4.1%, also better than the 4.2% that analysts were expecting. Also, wage growth continued to strengthen during the month.
The next important catalyst for gold will be the upcoming US consumer inflation data, which comes out on Tuesday. Economists expect these numbers to show that prices softened on a month-on-month basis, but remained above the 2% target in October.
Still, most investors believe that the Federal Reserve will decide to hike interest rates in its December meeting. If this happens, it will bring rates to between 4% and 4.25%, making gold less attractive. US bond yields have remained stubbornly high, with the ten-year and five-year rising to 4.8% and 4.675, respectively.
Therefore, despite these events, gold is rising because of the ongoing developments in Iran, where the situation remained calm during the weekend. Some investors were expecting the Trump administration to start bombing the country, a move that will lead to higher crude oil prices over time. Instead, Trump is leaning on economic pressure by launching an operation to prevent any trade between Iran and its 14 land neighbors.
In the aftermath, crude oil prices barely moved on Monday, with Brent and the West Texas Intermediate (WTI) rising to $97 and $90, respectively. There was fear that Trump would launch an attack shortly after the midterm elections.
Gold is also holding steady as its fundamentals have remained strong. One of these issues is the fact that US public debt will continue soaring in the coming years. It has already crossed the $40.5 trillion level, a few months after it crossed the $40 trillion mark. This means that it will jump to $41 trillion level earlier next year.
Gold price technical analysis
Gold chart | Source: TradingView
The daily chart shows that gold bottomed at $3,872 last month and then started rising again. It has now risen to $4,123, slightly higher than the important resistance level of $3,937, its lowest swing in June this year.
A closer look shows that gold formed a double-bottom pattern whose neckline is at $4,692, its highest point in August this year. A double-bottom pattern often leads to a bullish reversal.
Therefore, there is a likelihood that gold will keep rising as bulls target the key resistance level of $4,300. On the flip side, a drop below the key support level of $4,000 will invalidate the bullish outlook.
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