June 4th 2021
Yesterday’s drop in the highly speculative Gold market was caused by the perfect storm of misunderstanding of Inflation hedging and some robust US data, which caused a sharp rise in the US Dollar and US Bond yields.
I have said it before that although Gold may have been a hedge against inflation in the past, it is not immune from a stronger US Dollar and higher US Interest Rates.
Today’s trade action will be driven entirely by the US Non-Farm Payrolls number, which of course is following hot on the heels of yesterdays impressive ADP employment change, which posted an increase of 978,000 new jobs.
The speculative talk will be again of a big beat of the expected 600,000 jobs that economists are predicting. Deja vu or what?
We have been here before, and we had a horrible miss last time, surely lightning won’t strike in the same place twice.
However, with so much depending on tonight’s numbers, predicting payroll changes is very difficult following the pandemic. We have had so many conflicting indicators, I would prefer to play a waiting game.
Gold will likely get a big move today, but it is dependent on a number most economists can’t predict, so my guess, for what it is worth is that it’s bigger number than 600k. But, that could already be priced in, and only a mega number will see a drop in magnitude similar to yesterday.
So to be prepared for any eventually what are the levels that matter to the market?
Immediate support is found this morning at 1862 then you will find more buyers at 1854/1852 and then at key support of 1842 which was weekly resistance a month go and should now be strong support.
On the upside resistance can now be found at 1876/1878 then 1884 and 1880/1890.
Good luck trading today.